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Sourcing
ADVISERS
Global Services-AMR Survey

Buyers and vendors vote


for EquaTerra, Everest and
TPI to lead the pack
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with all Great Achievements you find


Passion

Building on Our Global Heritage Working Together: IT-Enabled BPO


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of the heart — an enduring testament to the power of love and what they do. An emerging trend is the integration of Business
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Our 31,700+ associates span 9 countries are united by a passion in major industry verticals, transforms client cost structures
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masthead_India_IK.qxp 8/21/2008 11:19 PM Page 3

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contents_IK.qxp 8/21/2008 11:37 PM Page 4

The gateway to the global sourcing of IT and BPO services


S e p t e m b e r 2 0 0 8 Vo l u m e 0 3 , I s s u e 3 2

FEATURES

The Definitive
18
Survey
of Sourcing

Advisers By Ed Nair and Phil Fersht

32 36
PROCESS By Namita Goel IS LPO RIGHT
FRAMEWORKS: Do process frameworks such as ITIL, Six FOR YOUR
Sigma and Lean deliver in the context of ser-
HELP OR vices outsourcing? A look at the challenges
COMPANY?
HINDRANCE? and opportunities in making them work By Daniel A Masur &
Sonia Baldia, Mayer
Brown LLP
Objective gating analysis in
legal process outsourcing

4 GlobalServices www.globalservicesmedia.com September 2008


contents_IK.qxp 8/21/2008 11:38 PM Page 5

24X7 COLUMNISTS
9 AN ITO PROJECT
WELL DONE 12 INDIAN DOMESTIC LISA ROSS
Lisa is the CEO and
OUTSOURCING MAR-
17 days of Beijing Olympics are founder of FAO Research,
backed by four years of planning
KET ON AN UPTICK an independent research
and technology integration By Imrana Khan firm focused exclusively
on the FAO and procure-
By Imrana Khan ment outsourcing mar-
kets. As a leading analyst
9 CAPTIVES REFUSE
TO GO AWAY 14 MANY GERMAN,
BRITISH CO. S GET
in the outsourcing industry for more than 12
years, she works closely with customers, advi-
sors and suppliers of outsourcing services.
By Imrana Khan SOLD IN JULY ’08
By Tholons
SHYAMANUJA DAS
Shyamanuja pioneered
10 GOVT. DEFENSE
CONTRACTS RULE
outsourcing
GREEN: THE journalism in India in
THE TOP 10 CHARTS 15 NEW COLOR OF
1998 with bpOrbit, a
newsletter for the
By Datamonitor
OUTSOURCING domestic Indian BPO
By Namita Goel industry. He is now
10 CUSTOMERS EYEING
SMALLER PLAYERS
Editor, Dataquest magazine, Cybermedia.

FOR INNOVATION
By Imrana Khan LORI BLACKMAN
OUTSOURCING
16 TO MOROCCO
Lori is the Founder and
President of DNL
12 JOINING HANDS TO
AMEND INDIAN
By Keerthi Nair Global. DNL Global
offers solutions across
POLICIES the entire lifecycle of tal-
ent management.
By Imrana Khan

12 INFOSYS, TCS SET TO


COMPETE WITH
ALLAN SCHWEYER
Allan is the President
and Executive Director
ACCENTURE, CSC
& IBM
17 OVER 100,000 JOBS
CUT IN JULY ’08
of the Human Capital
Institute and author of
By Imrana Khan By Namita Goel Talent Management
Systems.

EXPERT VIEWS PHIL FERSHT


Phil is Research Director,
42 Business Process
Outsourcing, offshoring
OUTSOURCING STRATEGY SET? DON’T and IT sourcing, for lead-
FORGET CUSTOMER COMMUNICATIONS ing industry analyst firm
By Bryan Baker, Thought Leader and Enterprise AMR Research, Inc.
Consultant, Xerox Global Services

45 48 50
THE PARADOX OF THE PARAMETERS THE POWERFUL LINK
CURRENCY-ADJUST- OF EVALUATING BETWEEN TALENT
ED GROWTH SOURCING ADVISORY MANAGEMENT & BIZ
By Shyamanuja Das, FIRMS PERFORMANCE
CyberMedia By Phil Fersht, AMR Research By Allan Schweyer, HCI

September 2008 www.globalservicesmedia.com GlobalServices 5


editors note_final.qxp 8/21/2008 11:54 PM Page 6

EDITOR’S NOTE

Are We at the End of the


India Story?
I nfosys reported profit growth of 18 percent in 2007, down from 56 percent
in 2006. TCS recorded just 4.9 percent increase in net profit in Q2 ’08 com-
pared to 37 percent in the same quarter last year. Wipro’s annual profit growth
slowed to 11.6 percent last year compared to 42.3 percent the year before. The
three companies are more or less in the same league, face the same demand and
supply dynamics, largely follow the same business model, and compete for the
same set of customers. The situational reasons for the fall in performance include
crisis in the financial sector in the U.S., slowing of the U.S. economy, rising
value of the rupee against the dollar, rising inflation and wage costs in India.
The slowing of growth of Indian services companies is now in focus. On
ED NAIR the basis of the recent financial results, stock analysts have been marking
many of them down to the “underperform” category, while the business and
Editor general press have been reporting the near end of the Indian story in the
ed@cybermedia.co.in services industry.
The reality is that these companies are at the brink of a chasm that they will
have to cross to scale the next peak. Every crisis brings with it some opportu-
nity. The Y2K crisis was a defining opportunity for India’s ascent into the glob-
al services industry. The dotcom bust and the recession in 2001 helped sepa-
rate out the stronger companies from pure body shoppers. The current economic
Every crisis brings with factors are forcing these firms or rather giving them the opportunity to relook
it some opportunity. at business models, geographies, portfolio of offerings and financial strategies.
In short, the companies will have to deliver on innovative and new value
propositions in global services. There is evidence that these companies have start-
ed work in this direction. Some of them are combining IT and business process
outsourcing in unique ways, some are combining business-process knowledge
and analytics, and yet others are creating new intellectual assets in the form of
solutions. All of this will force companies to move away from number of employ-
ees as the key measure of expansion and growth to looking at multiplying the
revenue per employee.
The leaders should have the magnanimity and courage to leave the erstwhile
value proposition of being the low-cost destination and supplier of skills to oth-
ers and get on to the new bus of opportunity. The period of transition is going
to be painful. Decidedly, the future is not going to be as racy and rapid beat
as the past. Let us learn to settle down to a period of sober growth rates, chop-
py earnings, and bated return on investments. GS

6 GlobalServices www.globalservicesmedia.com September 2008


ad.qxp 8/22/2008 2:35 PM Page 29
The gateway to the global sourcing of IT and BPO services
EVENTS
Featured Speakers
Vamsee Tirukkala
Offshore Product Co-Founder & Managing Principal,
Development Zinnov

September 24, Santa Clara

Ed Nair
Editor, Global Services

Session Flow
08:00 to 08:30 Breakfast and registration Free Registration
08:30 to 08:35 Welcome address
Ed Nair, Editor, Global Services
08:35 to 09:10 Keynote address
Vamsee Tirukkala, Co-Founder & Managing Principal, Zinnov
Includes
l Event Sessions and
09:15 to 09:35 Emerging Models and Value Implications in Product Development Partnerships
Keynote
09:40 to 10:00 Choosing the Right Destination for Offshoring Product Development
l Breakfast, lunch
10:05 to 10:20 Networking Refreshment Break and networking
10:20 to 10:55 Developing Enterprise Software –A Case Study in OPD breaks

11:00 to 11:20 The Scope for Innovation l Event handouts


11:25 to 11:45 The Future of Outsourced Product l Stipend of $100
Development towards travel
reimbursement
11:50 to 12:30 Panel Discussion and Q&A Forum:
Moderated by Ed Nair, Editor, Global Services
11:50 to 12:30 Networking Lunch

Key Points of Discussion


If you are an ISV or technology manufacturer or a key decision-maker in outsourcing, this event will help you in:
l Planning your project – leverage best practices to avoid common mistakes
l Assessing the growing number of OPD outsourcing destinations
l Differentiating the numerous providers in this space
l Managing the projects and building a provider relationship–Governance issues
l Ensuring that offshore outsourcing delivers innovation, not just savings.

www.globalservicesmedia.com/events/opd
Sponsored by:

Produced by:

TM
The gateway to the global sourcing of IT and BPO services
24x7_Final786.qxp 8/21/2008 11:30 PM Page 9

24x7
An ITO Project Well Done
17 days of Beijing Olympics are backed by four years
Outsourcing
to Morocco
p. 16

Captives Refuse to
Go Away
of planning and technology integration BY IMRANA KHAN
BY IMRANA KHAN

A ug. 8th, 2008: When the entire


world was counting down to the
And Atos accomplished each task. In
addition, Atos’ responsibilities also
C aptives still continue to grow.
From Jan. ’08 to Apr. ’08,
the industry saw 15 to 20 new
opening of the Beijing Olympics and included IT risk management and IT captives across the globe, says a
eagerly awaiting their favorite ath- security tasks during the games. recently released research by Everest
letes to make them proud, a few thou- The most challenging part of the Research Institute.
sands — the minds behind the mas- project was to meet the stringent Of these, seven to 10 captives were
sive IT required for the games — had deadlines. Atos Origin started on the set up in India — including BT’s glob-
a “different” goal to achieve by Aug. road to Beijing in Nov. ’04 and have al operations center with 250 to 500
24th. Every second was crucial as been working on since then. The test- employees in Gurgaon and Chrysler’s
there were no second chances given. ing phase was covered in detail sever- contact center in Chennai. Barclays
To accomplish the technology al times to ensure perfect delivery. Bank and DuPont also announced the
tasks, Beijing Organizing Committee Another test was to ensure the seam- opening up of new captive centers with
for the Olympic Games (BOCOG) less integration of technologies of the more than 1,000 and 250 to 500 Full-
set up a consortium of nine technol- other eight members of the tech con- time Employees (FTEs) in Noida and
ogy providers and partners — Omega, sortium. After the Beijing games Hyderabad (India), respectively. The
Kodak, Lenovo, Panasonic, Samsung, finale, Atos Origin will be executing a quarter also witnessed establishment of
China Network, China Mobile, carefully honed approach based on the four to five new centers in Eastern
Sohu.com and Atos Origin. Atos, years of experience and knowledge Europe — including P&G’s develop-
which managed and handled the gained to work on the Vancouver ment center (with 100 to 250 FTEs),
entire team for the games, has been the 2010 Olympic Games and the Lon- Honeywell’s development center (with
prime IT outsourcing contractor for don 2012 Olympic Games. 500 to 1,000 FTEs) and Microsoft’s
Olympic Games’ since 2002. “For the 2010 Olympics games, we innovation center (not known) in
For the 2008 games, the technol- already have people who are working Czech Republic, Ellentric 80’s R&D
ogy integration timeline for the games on the project in Vancouver. When we center in Poland — two in the Philip-
started with the defining of the IT were doing the Torino games, maybe pines — Nestle’s shared services center
strategy and IT master plan and con- a month or two after that, we started (with 100 to 250 FTEs) in Manila and
ducting knowledge-transfer workshops working on it. And, for the Olympic HSBC’s (with more than 1,000
in 2003. An estimated 4,000 IT Games in London we’ve started trans- FTEs) business-process outsourcing
experts from Atos Origin were respon- ferring knowledge. However, we have facility. However, one of the most
sible for the flawless delivery of the IT not started working on the basic pro- promising outsourcing destinations,
infrastructure — 10,000 computers,
1,000 servers, 200,000 accreditations,
5,000 result-system terminals and
ject. As soon as the Beijing project gets
finished, we’ll start working on these
projects as well,” said Jeremy Hore,
Latin America, witnessed no major
captive announcement.
The quarter also had companies
1
4,000 printers to name a few — Chief Technology Integrator for Atos such as Unilever, Shell and AOL
24x7

required at 39 competitions and more Origin, working with the BOCOG announcing their plans for divesting
than 31 non-competition venues for and the consortium of technology their offshore captives in Q2 ’08. GS
making the event memorable for ages. service providers. GS

September 2008 www.globalservicesmedia.com GlobalServices 9


24x7_Final786.qxp 8/21/2008 11:30 PM Page 10

ITdeals
Govt. Defense Contracts Customers
Rule the Top 10 Chart BY IMRANA KHAN
BY DATAMONITOR

J uly ’08 saw government defense


contracts dominating the top 10,
as a six-month base period and six
option years.
S carcity of talent and increased dea-
mand for knowledge-base services has
led to a proliferation of offshore providers.
with Lockheed Martin winning the The second largest overall deal for The increase in the number of service
biggest of the bunch — a $1,200 mil- the month of July was WNS Global providers has been noticed in the innova-
lion eight-year deal from the Trans- Services’ $1 billion contract with the tion-services — such as engineering, design
portation Security Administration U.K.-based insurance giant Aviva. The and research to name a few — and knowl-
(TSA) to manage its integrated hiring deal, which will run for about eight edge-services spaces. The number of
operations and personnel program. years, was negotiated as part of WNS’ Knowledge Process Outsourcing (KPO)
Lockheed Martin will develop a $228 million acquisition of Aviva’s firms has almost doubled and grown to 95
HR application to support the recruit- Business Process Outsourcing (BPO) percent since 2000, according to a recent-
ing, assessing, hiring, paying and arm Aviva Global Services, which has ly released study by Duke University and
promotion of all TSA employees, and 5,800 employees in centers in India Booz & Company, a global management-
also operate its HR systems. The deal and Sri Lanka. WNS will provide consulting firm. Of them, smaller providers
is one of the largest public-sector HR BPO functions such as policy admin- are creating “pockets of expertise,” states the
Outsourcing (HRO) deal, and is a istration, finance and accounting and study titled Offshoring the Brains as well as
major win for Lockheed in an area customer care. the Brawn.
outside its typical business. This Having paid BT Group $110 million “Smaller firms tend to be very focused
contract could signal a move into the for exclusive negotiation rights, Tech on industrial sector. That enhances their
wider commercial HRO market in Mahindra saw a return on that invest- overall value. Because knowledge space
the future. ment with the announcement of a $700 requires relatively less scale to be efficient,
Another five contracts making up million deal with the U.K.-based the scale advantages with the big guys
the top 10 this month were U.S. telecommunications provider. Under tend to diminish, if not eliminated when
defense related. the contract, Tech Mahindra will they compare them with small guys,” says
The largest of which was CSC’s deal assist BT in accelerating BT Group’s Vikas Sehgal, Principal, Booz & Company.
with the Department of Homeland transition to the platform-based ser- Smaller KPOs — largely specializing in
Security for secure managed data-cen- vices strategy focused on improving its IT and outsourced product development
ter services. The contract is structured customers’ experience. GS services — are heavily enticing talent and
taking lesser time to hire them than their
mid-sized or larger counterparts. Smaller
THE TEN LARGEST IT SERVICES DEALS IN JULY 2008 companies take an average of four weeks to
Customer Provider Engagement(s) Value Duration hire an employee with Master’s degree,
($ mn) (yrs) while large firms require nine weeks. When
l Transportation Security Lockheed Martin Application development 1,200 8 it comes to hiring talent with higher qual-
Administration and support ification (Ph.Ds), even the smaller firms
l Aviva WNS Global Services Business process outsourcing 1,000 8 (est.) need an average of six weeks.
l China Mobile Nokia Siemens Network integration 869 — However, big KPO companies take 14
Networks
weeks to hire such staff. These advantages
l BT Group Tech Mahindra Infrastructure mgmt. 700 5 are showing up in staff composition levels,

2
l South Tyneside Council BT Group Infrastructure mgmt. 597 10 with 35 percent of employees at small
l Dept. of Homeland Security CSC Data center outsourcing 391 8 (est.) providers holding Master’s degrees, versus
l U.S. Army Invertix Maintenance/support 300 5 23 percent who can make that claim at
l U.S. Army Stanley Computer engineering 300 5 mid-sized to large providers.
24x7

l Dept. of Defense Northrop Grumman Application mgmt. 240 4.5 “KPOs tend to have, not always but in
l NASA Qinetiq Infrastructure mgmt. 225 9 many cases, retention of employees. Unlike
TCS, Wipro, Infosys, small firms have a
* Application Development & Maintenance; SOURCE: DATAMONITOR IT SERVICES CONTRACTS DATABASE

10 GlobalServices www.globalservicesmedia.com September 2008


24x7_Final786.qxp 8/21/2008 11:30 PM Page 11

Metrics
Eyeing Smaller Players for Innovation
unique culture. Employees are more sat-
isfied with their work and they know DELIVERY CENTER LOCATIONS — ALL PROVIDERS (%)
everyone who is around. In fact, the man- India 54
agement also has a better pulse over
Western Europe Western Europe 24
what’s happening. But it doesn’t apply for
(not China) is the top
everybody because a lot of small guys will China location after India 21
get bought out in the near future. The
Latin America 21
guys who survive tend to have at least
some scale. For example, a KPO shop of Eastern Europe 19
50 people will have a hard time. On the U.S. 19
Delivery center countries

other hand, if the number is between 50


and 1,000 where you tend to have a scale, Canada 18
you start becoming a specialized player,” Philippines 14
adds Sehgal.
Other Asia 14
The study suggests that these smaller
firms can not only offer better quality and Mexico 13
speed of execution, but also suit well in Russia 6
terms of taking on customer-specific
process. Larger companies rely on more Africa 5
standardized offerings. Middle East 5
However, challenges are no less. The
Australia 5
respondents to the study reveal that 85
percent of KPO providers cite the avail-
0 20 40 60
ability of talent as one of the biggest risks
they face in their own businesses. As SOURCE: DUKE UNIVERSITY OFFSHORING RESEARCH NETWORK SERVICE PROVIDER SURVEY

many as 81 percent say financial com- business challenging. The study surveyed other countries, exploring the opportu-
pensation, and 77 percent say the need to 120 service providers spread across the nities and challenges facing innovation ser-
provide challenging work make their U.S., Europe, China, Brazil, India and vice providers.
In fact, customers’ satisfaction is an
emerging issue. More educated talent
PROVIDERS PLANNING NEW SERVICES doesn’t automatically translate into
BY SERVICE PROVIDER SIZE (%) customer retention. Around 65 percent of
Engineering 35 respondents to the study cite insufficient
service quality as most common reasons
24 for terminating a contract. “And 38 per-
Product
Development 11 cent state that their targeted cost savings
had not been achieved. Some of this dis-
24
satisfaction is reflected in KPO deal renew-
Research & al numbers, which trail those of traditional
11
Development outsourcing agreements. Offshore arrange-
14
ments focused on finance and accounting,

Knowledge/
Analytical
Services
12
22
and marketing/sales, have a 83 percent
renewal rate. By contrast, 68 percent of
engineering-focused contracts are renewed,
3
14
followed by 62 percent of new product
24x7

0 5 10 15 20 25 30 35 40 development deals, and 61 percent


Small providers Mid-size providers Large providers research and development partnerships,”
exhorts the study. GS
SOURCE: DUKE UNIVERSITY OFFSHORING RESEARCH NETWORK SERVICE PROVIDER SURVEY

September 2008 www.globalservicesmedia.com GlobalServices 11


24x7_Final786.qxp 8/21/2008 11:31 PM Page 12

News Metrics
Joining Hands to Amend Infosys, TCS
Indian Policies BY IMRANA KHAN

BY IMRANA KHAN
D espite dollar depreciation and eco-
nomic downturn, India’s top-tier IT-

G lobal Services’ article U.S. May


Cap Investments in India, Inc.,
published in the July 2008 issue,
to about 2.7 million people.
OSPAI will look forward for addi-
tional policy changes from time to
services companies, especially Infosys and
TCS, are not only increasing their global
presence by announcing new centers every
highlighted the concerns around time that will enable India as a pre- other day but also posting higher rev-
the nation’s government policies ferred outsourcing destination,” enues — TCS registered profit margins of
mentioned in Financial Bill 2008 said S. V. Ramana, President, more than 20 percent and Infosys record-
that might make it difficult for the OSPAI, and Chief Technology ed 27 percent net income. They con-
Indian outsourcing industry to Officer, Genpact, an Indian BPO sciously aim to compete with global play-
grow the base of its U.S. customers. and IT solutions provider and a ers such as Accenture, CSC and IBM,
It seems that the industry is not member of OSPAI. according to a recently released study by
ignorant about changing policies This non-profit and non-gov- Forrester. In 2008 India’s top three com-
for its betterment and thus, amend- ernmental association has been set panies — Infosys, TCS and Wipro — col-
ments and reforms are being con- up to promote the Knowledge lectively claimed 46 percent (up from 41
sidered after proper consultation Process Outsourcing (KPO), Busi- percent in 2007) revenue share in the
between the practitioners active in ness Process Outsourcing (BPO) total IT-services export earnings from
this space. The consent on the con- and call-center industries by rec- India. Even the next bests including Cog-
cept of home agents, simplification ommending and assisting in policy nizant, HCL and Satyam continue to
of documents needed for offshore changes based on the industry as grow. However, tier-2 and tier-3 companies
service providers registration, well as the market needs. “stand to lose out.” GS
removal of restriction on outgoing “Even though Indian outsourc-
Public Switched Telephone Net- ing industry has come a long way,
work lines for domestic call-centers, whatever we have created is just 4
are some of the recent examples of percent of global IT-enabled services
such practices. A newly set up asso-
ciation, Others Services Provider
market. There exists an opportuni-
ty to tap the remaining 96 percent. Indian Domestic
Association of India (OSPAI), took There is business sitting up to be
the responsibility to request the picked up. Thus, as we are a grow- Outsourcing
nation’s Department of Telecom- ing industry, there should always be
munication to consider these favor- a dialogue between regulators and Market on an
able changes. operators. We see this [association]
“OSPAI objectives will cover as a gain changer and we’ll have Uptick
the outsourcing industry, which such a long-term impact that this
BY IMRANA KHAN
currently has approximately 2,500 industry will change significantly.
BPOs, KPOs, LPOs, and call cen-
ters operational across India
employing approximately 700,000
Look at the talent sitting at home.
They too have a desire to work.
Imagine if the educated housewives
G one are the days when Indian’s large
IT companies were less interested in
the nation’s domestic outsourcing market.
direct and two million indirect, could be unleashed, how we would For all major deals, they were eyeing U.S
and generating a revenue of create a revolution. Such is the and Western European companies. But the

4 approximately $1 billion. Indian


outsourcing industry is expected to
grow at more than 25 percent
power of a dialogue. This is a big
step and Quatrro is proud to be a
part of it,” said Raman Roy, Chair-
trend changed significantly in 2007 when
the actual twist came in. Indian companies
fetched many major outsourcing deals.
compound annual growth rate and man and Managing Director, Qua- The Bank of India-HP deal, the Depart-
24x7

expected to reach $50 billion by trro, a BPO company and a mem- ment of Company Affairs-TCS deal, the
2012, creating direct employment ber of OSPAI. GS Dena Bank-Wipro deal, the Tata Teleser-

12 GlobalServices www.globalservicesmedia.com September 2008


24x7_Final786.qxp 8/21/2008 11:31 PM Page 13

Set to Compete with Accenture, CSC & IBM


OFFSHORE VENDOR REVENUES FOR 12 MONTHS ENDED MARCH 31ST, 2008 ($ MILLIONS)
$6,000 Top publicly traded Indian/India-centric technology firms
$5,000 Top three Next three Polarization prone < 1 billion
$4,000
$3,000
$2,000
$1,000
$0
S s o t h a i l s e h k a e r e s
TC fosy Wipr nizan atyam Tec indr Patn Synte olari awar Tec aste onat iGat ensa dTre min
In og S C L ah P e x IIT M S Z in u m
C H hM H N M TC
I
Tec KP

MOUNTING POLARIZATION SINCE 2006


COMPARING THE REVENUES OF TOP PUBLICLY TRADED COMPANIES
$6,000 FY 2008
$5,000 FY 2006
$4,000
$3,000
$2,000
$1,000
$0
Revenue of top publicly traded offshore firms (12 months ended March 31st, 2006 and March 31st, 2008)
SOURCE: FORRESTER RESEARCH

THIRD-PARTY PROVIDER SEGMENTATION


vices-TCS deal, the Bharti-IBM deal, the
Group Providers Key characteristics
Dabur-Accenture deal, and the Ministry of
Finance-HP-Microsoft deal are the ones International IBM-Daksh, HTMT, l Established BPO provider with total
Leaders MphasiS BPO, Firstsource, employees > 5,000
inked on a larger platform by Indian com- HCL, Intelenet l Primary focus on international mkts.
panies. Initially the buzz started with IT-ser- l Presence across multiple locations
l Typically < 20% revenues from
vices deals, but it is now gradually expand-
domestic customers.
ing to the Business Process Outsourcing
India Leaders Aegis BPO, Andromeda, l Established BPO provider with
(BPO) segment as well. InfoVision, OmniaBPO total employees > 5,000
The Indian domestic BPO market, l Primary focus on domestic markets
which presently stands at $1.41 billion l Typically > 60% revenues from
domestic customers or substantial scale
mark, is likely to increase by 35 percent to of domestic operation.
$5.38 billion by 2012, according to a
Emerging Co.s ATS Services, Caretel, l Employee size 500 to 5,000
recently released study by ValueNotes, a Intouch, Kankei, Magus, l Limited to specific verticals or
business intelligence and research firm. Spanco, vCustomer horizontals; specialized offerings on a
With growing awareness among customers small scale only
l Cater to domestic and/or
and increasing interest and surging matu-
rity among providers in the domestic mar-
ket, the share of third-party providers —
‘Me-too’ Players GK Management, Access
Systems
international customers.
l Typically
l Offering
< 400 employees
undifferentiated low-value
5
that presently stands at about $424 million services
24x7

l Limited presence in terms of delivery


— will increase significantly by 44 percent centers and marketing setup.
to 1.82 billion by 2012. GS
SOURCE: VALUENOTES RESEARCH

September 2008 www.globalservicesmedia.com GlobalServices 13


24x7_Final786.qxp 8/21/2008 11:32 PM Page 14

Many German, British Co.s Get Sold


BY NISHANT VERMA, PRINCIPAL, AND AVINASH VASHISTHA, CEO, THOLONS

G lobal IT and Business Process Out-


sourcing (BPO) industry continues to
witness large number of Merger and Acqui-
30 of which were of significant size as
against 40 in June ’08. These 30 deals in July
were considerably larger than the 40 in the
Overall, the 133 transactions accounted for
around $4 billion of acquisitions with an
average deal size of $28 million.
sition (M&A) transactions early in the sec- previous month on an average basis and Market dynamics, sub-prime crisis and
ond half of year 2008. In July ’08, with a hence, drove the total deal size in dollar terms unstable exchange rates have propelled the
total of 133 transactions being announced, to $3 billion against the $1.3 billion in June. IT and BPO players to adopt a risk averse
strategy, thereby diversifying the business
MEGA M&As OF JULY '08 into newer geographies. The U.S.-based
Acquirer Target Area Deal size companies continued to top the list both in
($ mn) terms of domestic and cross-border acquisi-
l Capgemini Getronics PinkRoccade IT services 400 tions followed by the U.K.-based ones.
Business Application Services Japan and Brazil were more active on the
l IBM Ilog IT software 340 domestic transactions, whereas Canada,
l Sophos Utimaco Safeware IT software 340
India and Switzerland were more active on
the outbound transactions. Germany and
l Convergys Intervoice IT services 335
France witnessed more inbound transactions
l WNS Holdings Aviva Global Services BPO 230 than outbound and domestic ones. The U.S.
l Cisco Systems Pure Networks IT software 120 and the U.K. topped the shoppers’ list
l BT Ribbit IT software 105 announcing most number of transactions
both on own land and on foreign shores, fol-
l Avocent Touchpaper Group IT services 45
lowed by Japan, Canada, India, Germany
l SemanticSpace Prolofics IT solutions 40 and Switzerland.
l BT Ufindus Internet 40 One of the major deals July ’08 was
l Interwoven Discovery Mining IT software 36 Capgemini, a French IT-services provider
acquiring the Netherlands-based business-
l Allied Digital Services Enpointe Global Services IT services 30
application division of Getronics for $400
l Know IT Net Result Consulting IT consulting 29 million. The acquisition is primarily to
l Avocent Ergo 2000 IT software 28 leverage the high concentration of public-
l Reply SpA glue: IT consulting 18 sector customers served by Getronics
l SI International Arrowpoint IT services 16
l Open Text Spicer’s format viewer IT software 12 TOTAL DEAL VOLUME
software division BY TARGET COUNTRY (%)
l Ariston Global ACE*COMM Corp. IT services 12
l Know IT Helikopter Systemutveckling IT software 6
l Micro Focus International Liant Software IT software 5
l BT Stemmer IT software —
l BT SND IT services —
l COMSYS IT Partners Symmetry Workforce Solutions IT software —
l Imtech Ebit IT services —
l Imtech Thinking Solutions IT services —

6 l Luxoft

l Fluensee
ITC Networks
TrenStar Tracking Solutions
IT services
IT software

— Canada: 1.9
France: 3.8
Others: 20.8
U.S.: 38.7
l Wolters Kluwer Compliance Online Internet —
24x7

Germany: 8.5 Brazil: 2.8


l Oracle Global Knowledge Software IT software — Japan: 7.5 Britain: 14.2
l Quatrro BPO Babel Media Gaming — Spain: 1.9

SOURCE: THOLONS SOURCE: THOLONS

14 GlobalServices www.globalservicesmedia.com September 2008


24x7_Final786.qxp 8/21/2008 11:32 PM Page 15

in July ’08 Green: The New Color of


Outsourcing
TOTAL DEAL VALUE BY NAMITA GOEL
BY TARGET COUNTRY (%)

H alf of 738 companies responding


to a Forrester Research survey in
April said they consider green criteria
Sigma Program,” which will include
setting up of overall objectives and strat-
egy to drive the program globally.
during their IT-procurement process, Interestingly, the research reveals
and four out of five have recycling pro- that by adopting green initiatives in
grams. IT leaders and organizations can data centers across the globe only
increase their influence by helping busi- 2 percent of the current ecological
nesses curb their environmental impact, issues can be solved. The challenge for
not only from IT equipment and oper- the providers is to improvise these ini-
ations, but also from other business tiatives at the customer site, and fur-
processes, Forrester VP Christopher ther spread awareness so that even they
Mines said in the report. can derive the cost and energy saving
That is, the role of services compa- benefits. IBM on Aug. 18th, 2008
Canada: 0.1 Others: 28.4
nies is no less than that of equipment launched Green Sigma to assist its cus-
France: 7.5 U.S.: 20.8
Germany: 6.3 Brazil: 9.3
providers in making the world greener. tomers lower their environmental
Japan: 0.5 Britain: 18.8
This “go green” trend has led to a impact, increase efficiency and reduce
Spain: 8.3 development of a lot of new Special Eco- costs by applying Lean Six Sigma
nomic Zones (SEZs). Currently, in principles to energy and water usage
SOURCE: THOLONS
India, there are around 513 SEZs that throughout their operations.
have been approved by various state gov- “Companies are making investments,
PinkRoccade Business Application Services ernments, of which 250 have already and last year in U.S. alone over $3 bil-
in the European region. In another large been notified under the SEZ Act 2005, lion were invested in green initiatives by
deal, Sophos, the U.K.-based IT player and over 150 of them are designed to companies. It is not just the corporate
acquired German software company, Uti- suit the needs of IT and IT-enabled ser- social responsibility but also the business
maco Safeware,employing over 300 people. vices industry. Earlier this year, WNS need to turn green,” says Kothandara-
The targets were valued at an average rev- took its first step toward turning carbon- man Karunagaran, Director, Infrastruc-
enue multiple of 3x signifying a premium of neutral and launched a “The Green Lean ture Services, CSC India. GS
over 200 percent on their total revenue.
Other major acquisition of the month is KEY IT-BPO PLAYERS & THE RECENT GREEN INITIATIVES
WNS Holdings, the U.S.-based BPO major
with large India presence, acquiring the four Company Green Activity
offshore BPO centers of the U.K.-based Accenture Introduced Green Technology Suite to help organizations
insurance major Aviva Global Services use IT to assess and improve green agenda in July ’08
for $230 million. The deal will further WNS Launched Green Lean Sigma Program in Feb. ’08 to move toward
ramp up the resources of WNS in India carbon neutralization
and Sri Lanka. IBM Introduced IBM “Green Sigma” Consulting
During the month, acquirers based in the ACS Launched a white paper “Shades of Green: The Business
Approach” stating the green policies at ACS
U.S. contributed to 30 domestic and 22
HP Partnered with Xtreme Energetics (XE), a solar energy system
cross-border deals spread across the U.K.,
developer based in Livermore, for the development of a solar
France, Germany, New Zealand, Switzerland energy system designed to generate electricity at twice the
and Ireland. Acquirers based in the U.K. slat-
ed out seven domestic and 10 cross-border
deals spread across the U.S., Australia, France
Wipro
efficiency and half the cost of traditional solar panels
Joined The Green Grid, a global consortium dedicated to advancing
energy efficiency in data centers and business computing eco
7
systems. Wipro’s other recent accomplishments include receiving
and Germany.
24x7

U.S. Green Building Council Certification for two of the company’s


Amongst the target geographies, the U.K. existing facilities
and Germany — after the U.S. — seemed to Patni New green IT-BPO in Noida, India.
be the markets of next best interest. GS
SOURCE: GLOBAL SERVICES

September 2008 www.globalservicesmedia.com GlobalServices 15


24x7_Final786.qxp 8/22/2008 1:14 AM Page 16

Fiveplaces to visit
Tangier
This city is the gate-
BY KEERTHI NAIR
way to Africa for many
travelers. Tangier charms
you with highlights that
includes the medina, the
S ituated in northwestern Africa
with coasts on the Atlantic Ocean
and the Mediterranean Sea, Moroc-
percent in 1999 to 9.8 percent in
2007 and 9.6 percent over the first
quarter of 2008 — and is again
Kasbah and the Ville Nouvelle. The city’s beautiful
beaches make it a favored destination among
co ushers in dynamism and consti- expected to drop to 9.2 percent in the
tourists, artists, poets and writers. tutes a link between Africa, Europe, second quarter of this year.
Fez the Occident and the Middle East According to McKinsey’s own
An ancient and making it a preferred regional busi- study, when compared with com-
religious capital city of
Morocco, Fez (Fès in
ness center. petitors such as Mauritius, Senegal,
French) is the living Morocco’s fate changed with the and Tunisia, Morocco is geographi-
example of a medieval construction of the CasaNearShore cally closer to France, has a larger and
Arab city with popular
monuments and architecture. The most famous Park — the first business area ded- more qualified talent pool, and boasts
place in Fez, Fez el-Bali, is a huge medina filled icated to offshore services and out- a better telecommunications infra-
with thousands of twisting alleyways and hundreds
of mosques. sourcing in Dec. ’05. Another park, structure. When measured against
Technopolis, constitutes engineer- Eastern European countries, Moroc-
Marrakech
It is known as ing, colleges and R&D spaces to tar- co presents reduced labor costs and a
the beautiful cultural get service providers. larger pool of French speakers. Rabat
center or imperial
capital of Southern Morocco boasts of a large pool of is the commercial and industrial cap-
Morocco. This city is HR as well — producing up to ital, Casablanca, the major econom-
most known for its
tranquility and peace; its beauty lies in the atmos-
50,000 university graduates annual- ic capital, and Marrakech, the com-
phere honeycombed alleys and minarets quivering ly. To ensure that the talent is well- mercial and cultural destination.
in the moonlight. It is here that time becomes sus- suited to BPO, ITO and KPO indus- A strong intellectual property
pended and you catch a glimpse of the past — so
rich and so remote and yet so palpable. try, promotion of technology and rights legislation, economic reforms,
Casablanca
professional training for 25,000 privatization program, willingness
This city, the modern recruits are being provided — from to build long-term trade and invest-
face and economic capital of
Morocco, has one of the
low-level administrative functions to ment ties, a highly motivated, young
largest artificial ports in the technicians to engineers to man- and skilled labor pool (well-versed in
world. Two places — the agers. All measures are being taken to French and Spanish), reliable tele-
Casablanca Central Market
and the Habbous Souk boost skilled talent to 100,000 by phone infrastructure and reduced
District — bustle with activity and thrill you with 2015, in order to maintain an abun- operating costs are attracting multi-
their variety of attractive merchandise.
dant supply of labor and prevent national corporations to invest in
RABAT wage inflation. World leaders of IT Morocco. With state-of-the-art high-
This city
(transliterated as and communication established in speed transportation lines, ports and
ar-Rabat or ar- Morocco include Cisco, Capgemini, harbors, railways, principal highways
Ribat) is the capital

8 of Morocco as well
as the Rabat-Salé-
Zemmour-Zaer
region. Situated on the Atlantic coast, it has nice
Compaq and more.
Such is the level of development
that Morocco’s employment min-
and airports with paved runways,
Morocco’s success story till date is
widely seen as a foundation to devel-
wide-open boulevards and shopping centers with istry indicates a fall in the overall op more offshore services there gen-
24x7

relatively important textile, food processing and unemployment rate — from 13.9 erating value. GS
construction industries.
SOURCES: APEBI, MOROCCAN FEDERATION OF INFORMATION TECHNOLOGIES, TELECOMMUNICATIONS AND
Compiled by Keerthi Nair OFFSHORING; SHAREDXPERTISE FORUMS; MOROCCAN AMERICAN TRADE AND INVESTMENT CENTER (MATIC) ;SITEL

16 GlobalServices www.globalservicesmedia.com September 2008


24x7_Final786.qxp 8/21/2008 11:33 PM Page 17

Jobscut
Over 100,000 Jobs Cut in July ’08
BY NAMITA GOEL

J uly ’08 has shocked the jobs market flights, workers and services offered to
with 103,312 jobs cut in the month. customers — to meet the increasing
Even more alarming is the fact that the fuel prices.
MONTH BY MONTH TOTALS
Month 2008 2007
number of jobs cut has crossed the Next in line is the financial sector l April 90,015 70,672
100,000 mark the second time in the claiming 15,517 jobs cut in July. l May 103,522 71,115
year and twice in the same quarter, In the year-to-date category, the finan- l June 81,755 55,726
according to Challenger, Gray and cial sector has seen the highest num- l July 103,312 42,897
Christmas, a global outplacement con- ber of jobs lost, and have already
sultancy firm. The number is 141 per- announced 100,775 jobs cut that is 50 MORTGAGE / SUB-PRIME LAYOFFS
cent more than what it percent more than the Month 2008 2007
was a year ago and 26 2007 seven-month total l April 21,145 2,505
percent more than what MARKET CONDI- of 67,006. l May 15,505 3,948
it was a month back. New York City
Ironically, in 2007, July TIONS STILL TOPS headquartered firms
l June 18,936 3,713
l July 14,735 1,175
reported the least num- THE CHART OF have reported the max-
ber of jobs cut that year. imum number of cuts
Market conditions
REASONS FOR year-to-date. Region- JULY ’08 JOBS CUT REASONS
still tops the chart of JOBS CUT IN wise, West and South- Reasons Number
reasons for jobs cut in JULY, WHILE OUT- west U.S. — particu- of layoffs
July, while outsourcing larly Texas — reported l Market conditions 38,959
has moved further down SOURCING HAS the maximum job loss, l Closing 23,779
to the last but third posi- l Bankruptcy 11,259
MOVED FURTHER and East — Delaware l Restructuring 8,706
tion among the list of — reported the least
reasons. Surprisingly, ris- DOWN TO THE number of jobs cut. l Cost-cutting 6,268
ing costs due to inflation THIRD-LAST POSI- The hiring plans l Demand downturn 5,728
that’s making news these released by various sec- l Relocation 2,405
days does not feature TION AMONG THE tors during the month l Voluntary severance 2,271
amongst the severe rea- LIST OF REASONS. stood at 19,661, reveals l Reorganization 1,550
sons for job loss. the monthly report. It /consolidation
All the five major cannot possibly com- l Merger/acquisition 1,033
industries — financial, automotive, pensate for the number that is a little l Unknown 403
transportation, government / non-prof- over five times this figure. l Fluctuating sales 253
it and retail — have seen an increase in The year 2008 has also seen a trend of l Rising costs 200
jobs cut as compared to the last year. “Interim CEOs,” and the average l Technological update 200
The transportation sector has been the tenure among Interim CEOs through l Outsourcing 150
major contributor to this number with July ’08 was about six months. l Order cancellation 143
17,051 jobs lost. This was quite expect- Seventy one interim CEOs have been /reduction
ed considering the way airlines are cut- replaced by permanent successors, l Firing 5
ting costs — reducing number of including six in July this year. GS Total 103,312

9
SOURCE: CHALLENGER, GRAY & CHRISTMAS

“We have seen job cuts increase in the majority of industries that we track, indicating that the downturn, which was isolated
to the housing and financial sectors just a few months ago, has spread throughout much of the economy. While the latest
reading on gross domestic product confirms that we have not yet fallen into recession, the big worry is that the economy will
24x7

continue to under-perform. If that persists for several quarters, or even years, it will be seen as a recession, particularly for
job seekers," said John A. Challenger, CEO, Challenger, Gray & Christmas.

SOURCE: CHALLENGER, GRAY & CHRISTMAS

September 2008 www.globalservicesmedia.com GlobalServices 17


cover story_final.qxp 8/22/2008 1:11 AM Page 18

The Definitive
Survey of
cover story_final.qxp 8/22/2008 1:11 AM Page 19

Sourcing
Advisers
Welcome to the first ever study on sourcing advisory
companies that covers the views of
service buyers and providers

AA
By Ed Nair, Global Services, and Phil Fersht, AMR Research

S
OURCING ADVISERS ARE A unique breed — some sort of a hybrid
between operations and strategy consultants, with an added eye for
research. As all good things, they were born out of a necessity. Orga-
nizations looking to outsource and offshore pieces of technology work
did not have the requisite understanding of the dynamics of outsourcing to
a third party or of setting up offshore captives. Sourcing advisories came in
to facilitate the process and ended up playing variegated roles of being a pre-
ceptor, an adviser, a coach and a dealmaker. In the past decade, they have

A
grown to become entities with formidable influence and impact on the glob-
al services industry.

This study is an attempt to understand what sourcing advisories do and


what do customers of services and service providers expect from them.
cover story_final.qxp 8/22/2008 1:12 AM Page 20

Special Report

What’s on Offer
The breadth of services that sourcing advisory companies
offer are a reflection of two clear trends in the practice of
global sourcing of services — increased complexity and grow-
ing maturity. Much of global sourcing continues to be an area
that requires specialized knowledge and expertise where the
scope for black box solutions is less. No wonder then that
more than half, up to nearly a third of advisers, are frequently
engaged in pre-transaction services like business-case devel-
opment, RFP formulation and provider selection. The SURVEY METHODOLOGY AND
other clear finding is that with sourcing contracts getting
RESPONDENTS' DETAILS
more complex, which in itself in an index of growing matu-
rity, the need for governance-related services are on the rise The Definitive Survey of Sourcing
compared to what it was two years ago. More than 50 per- Advisers was conducted jointly by Global
Services and AMR Research. The online
cent of the advisers reported the increased need for gover-
survey was done during the month of
nance services. July 2008 with participation from
respondents all over the world. In addi-
The Source of Sourcing tion, the sourcing advisory companies
How do sourcing advisers develop their business? While were asked to submit detailed informa-
many of them have both customers and service providers in tion about their firms.
their client roster, it is the latter that seems to keep the con-
sultants’ clocks ticking. With half the advisers citing their
relationships with providers as their primary source of new itiveness. Sourcing advisers are expected to transact sourcing
business, this does raise concerns over the bias in the selec- deals far more rapidly and often under a six-month time-
tion process. In other words, if provider X recommends to frame. To achieve this, most of them have reusable templates
its prospective customer the use of adviser Y, will adviser Y to assist in various stages of the sourcing lifecycle. While there
be more incented to recommend provider X in the hope of are obvious risks in rushing through a deal, as long as the
securing future business opportunities with that provider? So right provider is selected, a suitable master services agreement
customers need to avoid relying solely on their advisers’ rec- and base-line pricing structure developed, the adviser has
ommendations and access other independent research and done her job at this stage of the sourcing process. There have
advice to validate their decisions. been many instances where the adviser spent too long work-
ing on pre-transaction activity with the customers, resulting
Faster is Better in expensive consultant fees and, in hindsight, many of the
Global sourcing deals no longer have the luxury of time issues are better resolved during transition and governance
— companies are realizing that it is no longer about cost sav- processes, where “on-the-job” experience often leads to bet-
ings but the missed opportunity on value-add and compet- ter decisions.

20 GlobalServices www.globalservicesmedia.com September 2008


cover story_final.qxp 8/22/2008 1:12 AM Page 21

Special Report

KEY FINDINGS OF THE SURVEY from EquaTerra, Everest Group and TPI, Deloitte Con-
sulting performed well in this category in addition to some
l Most demand is for pre-RFP services, but the need of the boutique firms, namely Alsbridge and the W Group,
for governance work is much greater than what it which favor hiring veteran consultants. The other area of
was two years ago increased importance involves the ability of the sourcing
l Half the advisers frequently won their business via adviser to deliver governance support and the nuances of sup-
provider relationships — does this encourage bias? porting post-transaction activities. Booz & Company and the
l Demand for rapid-transactions in under six-month
Hackett Group, with their experience working with complex
timeframes
l Traditional “big 3” — EquaTerra, Everest Group and
change in mature organizations, were noted high-perform-
TPI — perform most consistently across all cate- ers in this category.
gories. Booz & Company, Deloitte, PWC and the
Hackett Group perform well in some areas, but Providers’ Voice
average in others Though sourcing advisories have most of the lead-ins
l Many of the small boutiques performed strongly, coming from service providers, providers are peeved about
example Alsbridge and the W Group, whose perfor- the aggressive sales agenda from sourcing advisers. Providers
mance is clearly centered on consultant experience also came up with a litany of expectations from sourcing
l Providers want more communication in the process
advisories. Notably, providers want more quality commu-
and advisers with genuine outsourcing implementa-
tion experience (not simply strategy) nication from sourcing advisers; they want their share of
l Some customers want a tighter methodology to voice in the deal-making cycle. Also, service providers
shorten the advisory cycle and advisers with more expect sourcing advisers steeped in real-life outsourcing
domain expertise. experience to be brought into play in a variety of deals. So
a love-hate relationship between providers and sourcing
advisories, in some cases, and an unholy nexus in others,
Are you primarily a customer, adviser characterizes the relationship.
or provider of outsourcing services? (%) Customers’ Byte
n=530
Customers were found to be more equivocal about their
23 Customer of expectations from sourcing advisers. Their expectations are
outsourcing
services/
basic — sourcing advisers should have extensive process
currently knowledge, deep provider knowledge, and solid expertise in
evaluating the overall sourcing-evaluation methodology.
outsourcing
All-in-all, the role of the outsourcing adviser has
24 Outsourcing become a lot broader than simply administering an out-
adviser/ sourcing transaction. Some advisers recognize this fact while
consultant
some, unfortunately, do not. Customers not only cited deep
53 Provider of process acumen and provider knowledge as two of the crit-
outsourcing ical elements, but also mentioned their global perspective
services
and post-transactional knowledge as being important. As
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008 customers strive to globalize their business models, they
view outsourcing as one vehicle to access low-cost offshore
Now the Oscars … Well, Not Quite talent, and stay competitive and nimble in global markets.
The traditional areas of the sourcing-advisory cycle, name- Hence, while achieving a successful outsourcing engage-
ly outsourcing strategy/business-case evaluation, provider ment is critical, the ability to tie their outsourcing envi-
selection and contract-negotiation skills, which are the ronment to their needs to be more competitive at a glob-
“bread-and-butter” skills needed to get to an outsourcing al level is equally important. Added to this is the fact that
transaction, were where the long-time established sourcing most customers cannot simply reach out into the market-
advisers performed the best, notably EquaTerra, Everest place to hire seasoned executives with outsourcing experi-
Group and TPI. Clearly, deal experience, existing intellec- ence — in most cases they have to re-train their existing
tual property and a good base of industry research serve these management to run a successful outsourced operation and
firms well in doing their job. The experience of the individual focus on adding higher-value competency to the business.
adviser — a veteran with deep business experience who The more the outsourcing adviser can engage in those high-
understands broader issues than simply executing an out- er-level conversations with their customers, the more suc-
sourcing transaction, and the corporate politics of out- cessful they will be, and the higher the value-impact they
sourcing — is also of high importance to customers. Apart will have on their customers. GS

September 2008 www.globalservicesmedia.com GlobalServices 21


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Special Report

The Sourcing Advisory Business


TYPICAL SOURCING ENGAGEMENTS WHERE ADVISERS ARE SOURCING
l Customers are primarily looking for pre-transac- CUSTOMER LEADS FROM
tion work: Business-case evaluation, RFP devel- l Word-of-mouth clearly is the most frequent
opment and provider selection source of business leads for advisers
l Governance services are now much more in
l Sourcing new business through provider-rela-
demand — over half the advisers surveyed are tionships is as common as direct selling
frequently asked to provide them. l Advertising not a particularly used technique.

What typical sourcing engagements are How does your firm source most of your
your clients requesting? (%) customer leads? (%)
n=115 Advisers n=114 Advisers
100 100

80 80

60 60

40 40

20 20

0 t
0
n n n s s s s th g
tio en io tio ice ip ce le
ou in
ua pm ect t ia rv nsh ren t sa m r tis
l l e c -
ev
a el
o se go e
s
at
io nf
e
re -o
f ve
e dev der ne nc rel co Di rd Ad
s i n a g o
ca P ov ct
io
er
n er in W
s- RF Pr ov
id nd
nes n sa G rov te
si Tr
a P At
Bu
Frequently Occasionally Never Frequently Occasionally Never

TIME TO TRANSACT How quickly are your clients generally expecting


l Transaction expectations are firmly in the you to finalize an outsourcing transaction?
four to six month bracket n=113 Advisers
l Most providers are responding to RFPs in
a two-week timeframe.

21 7 to 12
months

32 Less than 3
months

47 4 to 6
months

SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

22 GlobalServices www.globalservicesmedia.com September 2008


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Special Report

The Advisory Ratings


HIGH PERFORMERS (CUSTOMERS)
Category High performers
l Outsourcing strategy/business-case evaluation TPI, Booz & Company, Everest, EquaTerra, Deloitte
l Provider selection TPI, Booz & Company, Equaterra, Everest, PwC, PA Consulting
l Industry knowledge/research Everest, EquaTerra, TPI, The Hackett Group
l Experience of advisers Equaterra, TPI, Everest, Deloitte
l Contract-negotiation skills Equaterra, TPI, Everest, The Hackett Group, neoIT
l Governance support TPI, Booz & Company, Equaterra, The Hackett Group, Everest

THE OVERALL EXPERIENCE (CUSTOMERS)


Which of the following third party advisers have you worked with,
and how would you rate your overall experience with them? (%)
n=64 Customers

TPI

PwC

PA Consulting

neoIT

KPMG

The Hackett Group

Everest Group

EquaTerra

Deloitte

Booz & Company

Others

0 20 40 60 80 100
Poor Average Good
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

September 2008 www.globalservicesmedia.com GlobalServices 23


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Special Report

The Advisory Ratings


VALUE FOR MONEY (CUSTOMERS)
In terms of the adviser(s) you have used, how would you
rate the value for money you received from their services? (%) n=62 Customers

Others*
TPI
PwC
PA Consulting
neoIT
KPMG
The Hackett Group
Everest Group
EquaTerra
Deloitte
Booz & Company
Alsbridge

0 20 40 60 80 100
Poor OK/Good Great
* INCLUDES ARCHSTONE, PACE HARMON, PILLSBURY & W GROUP; ALL ADVISERS HAVE A MINIMUM OF SIX RESPONSES FROM BUYERS WITH EXP.
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

THE OVERALL EXPERIENCE (PROVIDERS)


Which of the following third-party advisers have you worked with,
and how would you rate your overall experience with them? (%) n=119 Providers

Others
The W Group
TPI
PwC
Pillsbury
PA Consulting
Pace Harmon
neoIT
KPMG
The Hackett Group
Everest Group
EquaTerra
Deloitte
Booz & Company
Archstone
Alsbridge

0 20 40 60 80 100
Poor Average Good
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

24 GlobalServices www.globalservicesmedia.com September 2008


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Special Report

Expectations from Advisers


WHAT CUSTOMERS WANT FROM ADVISERS
How critical are the following elements of a sourcing adviser relationship to you? (%)
n=66 Customers

Governance/provider
management knowledge
Negotiation skills

Global perspective

Its approach to change


management
Process knowledge

Overall sourcing
evaluation methodology
Deep provider knowledge

Industry research data

Benchmarking data

Tools and templates

Low-cost consulting fees

0 20 40 60 80 100
Nice-to-have, but not important Quite important Critical
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

What would be your preferred pricing for Will you use a third-party adviser again in the
sourcing advisory services, if you were to use future for sourcing advice?
them again in the future? (%)
n=63 Customers n=64 Customers

14 Monthly flat fee 8 No


24 Billable hours 36 Don’t know
SOURCE: GLOBAL SERVICES MEDIA / AMR SOURCE: GLOBAL SERVICES MEDIA / AMR
62 Flat total project fee RESEARCH SOURCING ADVISER STUDY, JULY 2008 56 Yes RESEARCH SOURCING ADVISER STUDY, JULY 2008

September 2008 www.globalservicesmedia.com GlobalServices 25


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Special Report

WHAT BUYERS WANT FROM ADVISERS


Statements: If you use a sourcing adviser again in the future, what would you do differently?
l Ensure they have an established and comprehensive process for reducing provider-selection time.
l Focus more on the skills of advisers than the reputation of the company
l Use RFP process to select adviser
l Have them provide a broader set of services to manage the post-selection transition
l Be better prepared internally when they arrive, use them sooner in the process
l Select individual consultants on the basis of their CVs rather than a consultancy company against a RFP
l Use different outsourcing advisers for expertise in a domain with a proven track record for innovative management
l Be clear of their role and ensure it does not restrict access to providers’ value add
l Use targeted assignments that are smaller in scope with very tangible deliverables
l Ask for more sushi at dog n' pony shows.

PROVIDERS ON ADVISERS…
In your opinion, have sourcing advisers been Are there sourcing advisers with whom you
a positive or a negative influence on assisting refuse to work? (%)
their customers’ sourcing strategies? (%)
n=106 Providers n=103 Providers

17 Negative 25 Yes
83 Positive 75 No

From your experience, how can advisers improve their sourcing process/methodology?
l By NOT pushing their own agenda (sales) at every instance
l Start focusing on the mid market customers too and also customize their RFPs to their needs
l More frequent communication with service providers
l Advisers with more hands-on experience and greater understanding of how sourcing is changing
l Keep learning and educating themselves and networking and helping each other
l Allow the providers to have a dialogue with the prospect during the sales process
l They must be open to encouraging lesser-known, yet competent, providers and not follow the trodden path only
l Reduce number of providers considered
l Have right attitude versus “beat up provider” mentality
l Hire people who have real-life experience in outsourcing delivery and implementation.

26 GlobalServices www.globalservicesmedia.com September 2008


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Special Report

Advisers’ dashboard
Name Year Total staff Staff to Global presence
founded manage
Full-time Part-time / Other service Americas Europe Asia Pacific
employees contracted provider Office(s) OAS
advisors Office(s) OAS Office(s) OAS
relations per- per- per-
sonnel sonnel sonnel
Alsbridge 2002 100 — 15 1 ND* ND* ND* ND* ND* ND*
Archstone 2003 40 0 2 0 In 5 210 In 1 40 — —
Consulting countries country
Avasant 2006 40 100+ 11 1 7 81 1 20 1 50
Deloitte 1840s 420 300 ND* 20 892 440 419 230 178 50
EquaTerra 2003 225 15 50 ND* 4 194 5 90 2 6
KPMG 1987 250 400 — 0 In 4 ND* In 10 ND* In 7 ND*
countries countries countries
neoIT 1999 ND* ND* ND* 3 1 ND* 1 — — ND*
PA 1943 400 0 100 0 11 410 14 2,055 7 135
Consulting
Pace 2003 38 22 3 1 2 63 0 0 0 0
Harmon
Pillsbury 1868 55 2 3 — 4 49 1 8 0 0
Winthrop
Shaw
Pittman
The W Group 2002 25 15 5 25 1 45 0 0 0 0
TPI 1989 ND* ND* ND* 1 ND* ND* ND* ND* ND* ND*
*NOT DISCLOSED; SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

THE ROLE OF THE


OUTSOURCING ADVISER
HAS BECOME A LOT
BROADER THAN
SIMPLY ADMINISTERING
AN OUTSOURCING
SOURCING ADVISERS TRANSACTION.
ARE EXPECTED TO
TRANSACT SOURCING
DEALS FAR MORE
RAPIDLY AND OFTEN
UNDER A SIX-MONTH
TIMEFRAME.

September 2008 www.globalservicesmedia.com GlobalServices 27


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Special Report

Name Revenues in % of Revenue How do you charge your Where do you see a In the next 18 months,
2007(A: $1 to Attributed to A: Sourcing customers? (A: Flat project change*? (A: Flat project changes expected in A:
$10 mn; B: $11 to Strategy & Evaluation; B: fee; B: Billable hours; C: Fixed fee; B: Billable hours; C: Fixed Sourcing Strategy &
$50 mn; C: $50 Solution, Design & project fees + billable hours; project fees + billable hours; Evaluation; B: Solution,
to $250 mn; D: Contracting; C: Transition & D: Monthly flat rate; E: D: Monthly flat rate; E: Design & Contracting; C:
$251 mn+) Governance Services Annual subcription; F: Other) Annual subcription; F: Other) Transition & Governance
* In the next 18 months

Archstone B (sourcing A = 50, B = 25, C = 25 A C and D A = up**, B = up, C = up


Consulting revenues) and
C (total consul-
ting revenue)

Alsbridge B A = 33, B = 34, C =33 B B A = up, B = up, C = up

Avasant B A = 32, B = 38, C = 30 A, B, C B A = no change, B = no


change, C = no change

Deloitte Not Disclosed A = 40, B = 30, C =30 B A = up, E = continental A = up, B = up, C = up
fee arrangements

EquaTerra Not Disclosed A = 15, B = 60, C = 25 A, B, F (at risk based on A and F (at risk based on A = up, B = down***,
outcomes) outcomes) C = up

KPMG C A = 20, B = 40, C = 40 A A A = up, B = up, C = up

neoIT Not Disclosed A = 50, B = 30, C = 20 A — A = up, B = no change,


C = up

PA C A = 30, B = 30, C = 40 C A A = up, B = up, C = up


Consulting

Pace B A = 20, B=40, C = 20 B C and D A = up, B = up, C = up


Harmon

Pillsbury B A = 40, B = 50, C = 10 B A and C A = up, B = up, C = up


Winthrop
Shaw
Pittman

The W Group B A = 50, B = 30, C = 20 D — A = up, B = up, C = up

TPI C A = 35, B = 50, C = 15 B — —

28 GlobalServices www.globalservicesmedia.com September 2008


cover story_final.qxp 8/21/2008 11:51 PM Page 29

Special Report

Functional Expertise Change in functional areas you serve Industry Expertise


Deep Some Cursory in the next 18 months Deep Some Cursory
Decrease Same Increase

IT infra, app.s, HR Claims — HR, call IT infra, app.s Consumer packag- Retail, automotive, Chemicals,
F&A, procurement, Proces- center F&A, procurem- ed goods, financial other mfg, telecom, public
call center sing, en- ent svcs, health care tech, transportation
gg., & logistics, utilities,
design media
IT infra, app.s, Call center, RPO, — Call cent- IT infra, app.s, Financial svcs, tele- Retail, consumer —
F&A, HR, procure- product KPO er, M&As F&A, HR, procur- com, high-tech, util- packaged goods, aut-
ment, M&As development ement, KPO ities, media, public omative, other mfg,
transportation &
logistics
IT infra, app.s, KPO — HR IT infra, App.s, procure- Retail, chemicals, Consumer packaged —
F&A, HR, procure- F&A, call ment, M&As other mfg, financial goods, automotive,
ment, call center center, svcs, telecom, hi-te media
KPO ch, health care, util-
ities, public
IT infra, app.s, F&A, — — — — IT infra, app.s All — —
HR, procurement, F&A, HR,
call center procurement.
call center
IT infra, app.s, F&A — — — HR, proc- IT infra, app.s, All — —
HR, procurement, urement, F&A
call center call center
App.s, F&A, IT infra, HR, — — — IT infra, app.s, Mfg, financial svcs, Retail, consumer pa- Chemicals,
procurement call center F&A, HR, telecom, tech, ckaged goods, auto- transpor-
procurement health care motive, utilities, med- tation & logis-
call center ia, pubic tics
IT infra, app.s, F&A, HR, procem- — — App.s, HR, IT infra, F&A High tech, telecom Retail, mfg, financial —
high-tech, media ent, call procure- svcs, insurance, hea-
center ment, call lth care, media, utili-
center ties public
IT infra, app.s F&A — — IT infra, App.s, F&A, HR, Financial svcs, Retail, consumer pa- —
HR, procurem- call center procurement insurance, telecom, ckaged goods, chem-
ent, call center tech, utilities, health icals, automotive,
care, media, public other mfg, transpor-
tation & logistics
IT infra, app.s, HR — — Procuem- IT infra, app.s, Retail, other mfg, Consumer packaged —
F&A, procurement, ent, call F&A, HR financial svcs, high goods, automotive,
call center center -tech, telecom, utili- transportation & log-
ties, health care istics, media, public
IT infra, app.s, F&A, — — — App.s, HR, IT infra, F&A, Retail, consumer Automotive, transpo- Chemicals,
HR, procurement, call center procurement, packaged goods, rtation & logistics, public
call center facilities mgmt., other mfg, financial utilities
telecom, manag- svcs, telecom, tech,
ed network svcs health care, media
IT Infra, app.s F&A, HR, pr- — — HR IT infra, app.s, Retail, consumer pa- Transportation & log- Chemicals,
ocurement, F&A, procureme- ckaged goods, mfg, istics, utilities automotive,
call center nt, call center financial svcs, telec- public
om, hi-tech, health
care, media
IT infra, app.s, HR, F&A, procur- — — — — All — —
F&A, BPO, multi- ement, call
process center
** INCREASE; *** DECREASE; SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008

September 2008 www.globalservicesmedia.com GlobalServices 29


The gateway to the global sourcing of IT and BPO services
PORTFOLIO
nCounter is an event series that connects 10 to 15
nCounter Series buyers of outsourcing services to five service providers in
order to facilitate global outsourcing relationships. It is a
closed room discussion where the providers present their
perspectives on a pre-defined subject.

  Roundtable Series A roundtable is a half-day formal gathering of qualified


business technology buyers, and is a sole sponsorship-
driven custom event. It also provides a platform to
sponsors for lead generation and insights from business
technology professionals.

Destination Series is a dedicated event to educate


Destination Events the buyer community about the benefits of offshore or
nearshore locations. Each event occurs for five hours
with industry experts, including Global Services’ editor,
an analyst, and sponsors.

The annual Global Services Conference offers sessions,


GS Conference peer discussions, workshops, and real-life case studies
that highlight the latest outsourcing strategies, new
and emerging technologies that enable seamless global
services, and best practices. It is full-day event with
parallel track sessions.

Outsourcing Summit is an annual, one-day event that


Outsourcing Summit encourages buyers of global IT and BPO services to
discuss, learn and experience outsourcing trends with,
and from, the renowned experts.

e-Magazine This is a user-friendly media tool that helps you to enjoy


reading and downloading the entire issue of
Global Services magazine in a digital format (available
at www.globalservicesmedia.com)

GS 100 survey A list of world’s 100 most innovative IT and BPO service
providers, which are selected on the basis of an annual
survey conducted by neoIT and Global Services.
Print Online Events Custom

A print advertorial section that focuses on a category


GS 100 showcase — highlighted in the Global Services 100 survey. This
helps Global Services 100 Companies to showcase their
leadership qualities that make them distinguished in
their categories.

Microsites are dedicated platforms for buyers developed


microsites on chosen subjects based on industry or process specific
topics. It helps the buy-side decision-makers to observe
the available content — features, experts’ comments,
news.

Global Services’ Newsletters (twice a week) deliver top


Newsletters stories, a blog, a write-up by an expert, upcoming events’
details, digital magazine, and exceptional features on the
topics to the newsletter subscribers. The Global Services
Team carefully chooses the newsletter content for its
large base of opt-in subscribers.

Global Services Connect is a series of special, sponsored


GS connect newsletters, which deliver top stories, a blog, a write-up
by an expert, and exceptional features on specific topics.
The connect also includes the best of Global Services’
print and online published content.

An annual directory of about 1,000 global IT and BPO


The osourcebook services providers’ listing and profiles. It is available in
four formats: Print, online (www.osourcebook.com), CD,
and digital editions.

Article reprints are professional, customized, high-quality,


reprint Services printed copies of magazine articles. They are innovative
and powerful marketing tools that feature your company,
product, service or industry.

More information available at www.globalservicesmedia.com/images/Offerings.xls

www.globalservicesmedia.com
feature-processes.qxp 8/22/2008 12:05 AM Page 32

32 GlobalServices www.globalservicesmedia.com September 2008


feature-processes.qxp 8/22/2008 12:01 AM Page 33

Tools & Technologies

Process Frameworks
Help or Hindrance?
Do process frameworks such as ITIL, Six Sigma and Lean deliver in the
context of services outsourcing? A look at the challenges and opportuni-
ties in making them work

By Namita Goel

F
RAMEWORKS ARE MEANT TO simplify borrowed from the manufacturing world, and can be
complex processes and make them more effi- used in outsourcing any kind of process, ITIL is more IT-
cient. But processes themselves are so dynamic focused, and can be used in any IT process. The trend
that it forces one to revisit the framework and over the past few years has been such that many providers
readapt it to use. If you add outsourcing to that, have come out with their proprietary frameworks, in
the complexity increases much more. Therefore, to keep up which they pick up best practices from the existing stan-
with this change and manage the complexity, training pro- dard frameworks.
grams in organizations are a fine mix of standardized frame-
works and need-based concepts. Challenges in Adopting Frameworks
Most of these frameworks such as IT Infrastructure These frameworks are all organization driven and require
Library (ITIL), Six Sigma and Lean help customers as well an effort to ensure that the employees take them seriously.
as service providers in getting rid of the waste in the process, “At IBA, we have optimized the procedures of incorporating
explained Derek Lonsdale, Managing Consultant-IT and deploying the frameworks, and are carried out through
Practice, PA Consulting. In some cases, they help the cus- the implementation of an automated project-management
tomers in understanding what part of the process to out- system here. We also organize trainings of software develop-
source. Agreeing with Lonsdale’s point of view, Mudit ers and regular auditing of the employees to test the process
Saxsena, SVP and Global Six Sigma and Transitions Leader, understanding,” explained Zinaida Larionova, Top
Genpact added, “These frameworks help in assessment of Management Quality Representative, IBA, an IT service
data and identification of the waste in the processes to provider based in Eastern Europe.
increase the overall efficiency of the processes.” Apart from ensuring that frameworks are well under-
While Six Sigma and Lean are generic frameworks stood, the challenge also lies in the seamless integration of

September 2008 www.globalservicesmedia.com GlobalServices 33


feature-processes.qxp 8/22/2008 12:01 AM Page 34

Tools & Technologies

the customized framework into the existing one. “Many of investment, it’s next to impossible to be successful,”
these processes are being performed in some form or fashion explained Kevin Smilie, Director, Chief Information
in the customers’ environment before they begin to adopt Officer-Services, TPI, a sourcing advisory firm.
ITIL standards. The challenge they face is in adapting their Training is another challenge that many firms face. “The
current processes to take advantage of the standards and to ITIL framework has five modules and each of which is
deploy the standards for those processes that are absent. around 250 pages long so for an employee to read through
With the proper sponsorship and investment, incorporating over 1,000 pages of information becomes a challenge. So
the processes isn’t difficult. Without that sponsorship and here at PA Consulting, we modify the frameworks as per the
process requirements so that the employees can relate to it
and understand it better,” added PA Consulting’s Lonsdale.
CASE STUDY - I “Incorporating these frameworks at the customer site in
the customer processes is another challenge,” added Tajinder
Vohra, SVP and Business Leader, Genpact. Change man-
Change Management / ITIL agement is an integral part of outsourcing and in most of the
Customer: A global chemical company
cases, despite the fact that the work is outsourced to the
Provider: IBM provider, the customer is expected to have the same level of
A global chemical company outsourced its IT infra- understanding of the framework as the provider to be able
structure to IBM to improve end-user IT services. ITIL to govern the sourcing relationship better. So, it is the
standards were chosen as the means to standardize providers’ responsibility to ensure that the people involved
the IT infrastructure across providers.
in the sourcing process from the customer side are on the
Challenge: same page. Herein, conducting regular training sessions
After a year into the contract, the infrastructure- would help.
service levels failed to improve as intended, and
IBM’s account team investigated the issue. The main
cause was determined to be the number of emer-
The Drivers- Customers or Providers?
gency changes that the customer approved. IBM Both the customer and the provider could be the driver.
initiated a Change Management Improvement “ “Based on experience, almost 95 to 98 percent of proposals
Team consisting of members of the CAB (Change that we respond to, the customers are very keen to under-
Advisory Board), the IBM Change Coordinator and a stand quality assurance processes, the approach we will fol-
Process Specialist.
low to deploy quality practices, our continuous improve-
Solution: ment focus and how we’ll bring value addition to their
The ITIL change process was used as a guide to processes year on year,” said K.V. Rammohan, VP, Infosys.
determine gaps in the current change management “It is both. We have had situations where we have asked
process. The team determined that the normal
our customer to be certified because of the work they are
change cycle time was too long, and that the project
managers had not been trained on the change doing, and we also have had contracts where the customers
process when implementing software changes. have said we will sign the contract with you on a condition
Results: that you have to get ‘x’ number of people in the certified,”
explained Debora Verisario, Global Program Manager,
l The cycle times for non-emergency changes within
the customer’s process were examined and restruc- Process Standards Center of Excellence, IBM.
tured. By using Lean to eliminate waste, the cycle In some cases, it is mutual adoption of frameworks that
times were greatly reduced so fewer emergency wins the case. “Where the customer’s process maturity is
changes were requested believed to be below that of the service provider, the cus-
l Through the implementation of a more thorough tomer will adopt the service provider’s process. For the cus-
change form template, the change process improved. tomer team, it means understanding the service provider’s
So the customer’s CAB had better information at the
process and how it’s different from the current customer
start of their process, thereby reducing the time it
took to ask additional questions processes to be able to make the changes. In other cases, the
customer will require the service provider to integrate to the
l By providing project managers with training and
a calendar to use for advanced scheduling, the
customer’s process. This is a matter of understanding the
number of emergency changes were cut in half point in the process where the customer’s process stops and
after three months the service provider’s process begins once the service has
l Due to the improvements in change management, been outsourced,” explained Smilie of TPI.
the overall stability of the IT environment increased
and end-user satisfaction improved. The Sourcing Decision
The customer’s perception of the service provider’s
process maturity is factored into the selection decision.

34 GlobalServices www.globalservicesmedia.com September 2008


feature-processes.qxp 8/22/2008 12:02 AM Page 35

Tools & Technologies

INFRASTRUCTURE MODEL
This infrastructure
model shows a set of Info
rm
end-to-end integrated t at
en ion
services that are m

M
focused on maximizing

ag

an
efficiency and effective- an

gema
rvice M
ness whilst minimizing
risk. These include:

ent and
l An integarted portfo-
Se

lio of end-to-end securi-


ess

ty services for optimum

S
protection

ec
i n
us

u
r it
l End-to-end service B y
management that helps
improve the customer
experience.
SOURCE: CSC INDIA

These frameworks are utilized through the entire service-


management life-cycle, and are required for different aspects CASE STUDY - II
of the service provided to the customers. “For example, in
the ITIL framework, ‘incident management’ is utilized for
ensuring the customer is up and running quickly; ‘problem
Fraud Analysis/Lean
management’ is utilized to ensure the root cause is identified and Six Sigma
and corrective and preventive action is appropriately Customer: A global health-care service provider
applied. ‘Change management’ is utilized in concert with Provider: Genpact
‘configuration and release management’ to ensure that
Challenge:
changes to the client’s environment are stable and stay cur-
l Current processes not streamlined — multiple hand
rent while all the required information is tracked appropri-
offs and backlog inventory situation
ately so that the relationships and interfaces are known and
l Controllership issues around claims inventory man-
like wise. To keep these processes efficient, these frameworks
agement, process metrics and quality audit process
play an important role,” adds Beki Picus, AVP, Service
l No report generation processes to monitor paid
Management and Compliance, ACS.
out of compliance.
“Prospects and customers demand seamless, consis-
tent and reliable service based on industry best practices
and standards such as ITIL-based Service Management Solution:
and ISO 20000,” explained Neeraj Garg, General l Out of compliance payment reduced from target
Manager, CSC India on how customers are demanding 50 to 25 percent (Further reduction projected with
these standards. adequate capacity planning.)
Is it important for an organization to undergo the frame- l Automated report-generation process created
work route when processes themselves are a moving target? with new process metrics and daily inventory
management
The answer is yes. It is like a person who after working for a
few years understands the business quite well, but still opt- l New Quality audit process introduced for new
processes.
ing for a management degree to get the experience of a struc-
tured learning. The person knows that eventually the knowl-
edge will get old and would need continuous upgrading, but Results:
in order to upgrade one needs to have a thorough ground- l 25 percent fraud reduction, saving to customer
ing in the basics. So is the case with these frameworks. No l Revenue gain — $1 million per annum
matter how old they get and no matter how much cus-
l 32 FTE Reduction — $1.2 million saving.
tomization they need, these frameworks will always be treat-
ed as a book with multiple editions. GS

September 2008 www.globalservicesmedia.com GlobalServices 35


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IS LPO
RIGHT for your
company ?

Objective Gating Analysis in


Legal Process Outsourcing

By Daniel A Masur & Sonia Baldia, Mayer Brown LLP

M
ANY CORPORATE LEGAL DEPART- generated $236 billion in revenue, and is expected to grow
MENTS and even law firms in the U.S. are steadily at a rate of over six percent per year for the next
experimenting with Legal Process decade, according to the U.S. Census Bureau. This sizeable
Outsourcing (LPO) as a means to reduce market offers a ripe and lucrative environment for LPO to
costs and increase efficiencies without sac- take hold.
rificing, or sacrificing too much, the expected Quality of Indeed, to meet perceived growing demand, innumer-
Service (QoS). The momentum behind the current popu- able LPO providers have entered the marketplace offering
larity of LPO is a reaction to the steadily increasing legal alternative service, resulting in the outsourcing of certain
costs in the U.S. and to some extent as well the economic legal tasks and services. Only a few years ago, the LPO
headwinds in a recently faltering global economy. LPO model was viewed with substantial skepticism and raised the
growth potential may perhaps directly correlate with the question of whether it was “even legal,” but LPO is now
overall size and projected growth in the legal-services market viewed as a viable alternative in certain circumstances for
in the U.S. In 2006 the legal-services industry in the U.S. companies’ legal needs. With that said, the framework

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required to regulate the LPO industry properly and to meet its legal needs consistent with its overall strategic busi-
address the legal and ethical issues that are certain to arise ness goals and objectives.
is still in the nascent stage but is evolving. While the U.S. Some of the fundamental assessments under a thought-
legal community has yet to take any kind of definitive ful LPO gating analysis include: What are the legal needs,
stance on the viability of the LPO model, the LPO indus- services, and requirements that may be suitable for an LPO?
try appears eager to embrace some form of self regulation What are the dependencies where a complete handoff of the
to establish itself. legal tasks and services is not possible? Are the services need-
Specifically, a company selectively delegates certain ed on a recurring basis (such as patent application prepara-
legal functionalities and services that are traditionally per- tion), a non-recurring basis (such as unique litigation involv-
formed in the U.S. to an LPO provider at an offshore loca- ing facts peculiar to a large contract) or an intermittently
tion, such as India. That provider offers the combined ben- recurring basis (such as periodic product-liability claims or
efit of a skilled or trainable workforce that is available at certain due diligence tasks associated with transactions or fil-
wages significantly lower than those demanded by U.S. ings)? Do the services at issue relate to core or non-core busi-
counterparts. In other words, the basic value proposition ness functionalities? Does the customer take on some level
of the LPO is that outsourced legal work is performed in of additional risk related to the source of the need for the
the offshore location by trained lawyers (licensed in that legal services by engaging in an LPO with respect to the ser-
jurisdiction) and paralegal staff at some fraction of the cost vices, and if so how much? How important is cost savings
of having the same work performed by the U.S.-based legal vis-à-vis QoS? How do the possibly outsourced services sup-
professionals. Services subject to LPO can range from tasks port or fit with the overall strategic corporate business goals
such as legal coding and legal transcription to more and objectives?
involved projects involving legal research, litigation sup- As part of the LPO gating analysis, companies contem-
port, document review, contract drafting and manage- plating LPO must also carefully assess the generically applic-
ment, legal publishing, and Intellectual Property (IP) relat- able risks, ramifications and ethical concerns inherent in off-
ed services, such as patent application preparation. In addi- shoring legal work that come hand in hand with the bene-
tion to the cost considerations of LPO, it may also enhance fits of LPO. Some of these key risks and ethical considera-
home-base productivity by “freeing up” the customer to tions peculiar to an LPO include (i) the risk of unauthorized
focus on strategic and value-added legal work as well as to disclosure of confidential information, (ii) liability concerns
take advantage of time-zone differences in offshore loca- related to the unauthorized practice of law, (iii) how to pro-
tions, thus enabling 24x7 operations. For these reasons, tect, and avoid, the unintended or inadvertent waiver of the
among others, LPO presents a new strategic option for attorney customer privilege and assessing whether it even
legal departments and law firms. would apply in the first place, (iv) the lack of robust proce-
Whether a real benefit is available through LPO to a spe- dures to identify and resolve conflicts of interest, (v) the
cific company, however, depends sub- recognition when applicable of the
stantially on a sober assessment of the need for client consent, (vi) fee-sharing
company’s legal needs and require- MOST LPO DEMAND IN arrangements and customer disclosure,
ments, and whether the legal services
and tasks at issue can be realistically
THE U.S. CURRENTLY and (vii) compliance with export con-
trol laws with respect to offshoring
outsourced without sacrificing impor- INVOLVES “LOW- information regarding U.S.-originated
tant qualitative considerations — inventions for patent-drafting services.
meaningful quality degradation can
VALUE” LABOR-INTEN- Most LPO demand in the U.S. cur-
counter productively result in the SIVE LEGAL SERVICES. rently involves “low-value” labor-inten-
added cost of home-base “redo” as well sive legal services, such as legal tran-
as increase the company’s risk profile. A
AS THE LPO INDUSTRY scription, document conversion, legal
properly performed initial assessment MATURES, THE OUT- coding and indexing, and legal data
of the virtues and vices of an LPO, or entry, predominantly provided by
basically an “LPO gating analysis,” SOURCED LEGAL WORK India-based LPO providers. As the
should determine the answers to the WILL LIKELY MOVE UP LPO industry matures, the outsourced
questions of whether, to what extent, legal work will move up the value
where and how a company may suc- THE VALUE CHAIN. chain. A research company,
cessfully deploy the LPO model to ValueNotes, estimates that in 2006

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Processes: Legal Process Outsourcing

India’s LPO industry generated $146 million in revenue and third-party LPO firms that provide legal services to U.S.
projects it to grow to $640 million by 2010, and by that corporations and law firms (these firms include niche firms
time LPO firms in India are expected to employ over 32,000 such as Pangea3, Qusilex and Lexadigm that only provide
professionals. While another research company, Evalueserve, legal-services and multiservice firms such as Infosys and
is more conservative in its LPO projections, the fact that WNS, which provide legal services in addition to other BPO
LPO is likely to become a sizable mainstay in the U.S. legal- offerings). Variations of these models will emerge as the
services market is increasingly difficult to question. LPO industry matures to better service LPO customers.
India’s emerging prominence in LPO is not surprising Each model has its own advantages and risks that must
given the remarkably successful Indian market for IT out- be evaluated carefully so as to identify and assess the relative
sourcing (ITO) and Business Process Outsourcing (BPO). pros and cons for a particular LPO strategy. LPO customers
More recently, many U.S. companies have engaged in what should adopt different delivery models taking into account
are known as Knowledge Process Outsourcing (KPO) trans- numerous variables, including the nature and scope of the
actions, which leverage India’s vast resource of highly skilled, activities to be offshored, previous offshoring experience, a
educated workers to perform knowledge-driven or “high- qualitative due diligence review of the potential providers’
end” processes that require specialized domain expertise. work, concerns about security and control of confidential or
LPO — a specific example of KPO — is one for which privileged information, risk tolerance, tax considerations
India offers enormous potential because of its large reservoir and budgetary constraints.
of English-speaking lawyers and paralegals whose salary In sum, LPO can present a viable alternative to compa-
demands are extremely competitive at typically only 10 to nies seeking to reduce their legal costs. Its usage, however,
15 percent of those of their U.S. counterparts. This profes- must be considered very thoroughly and carefully taking
sional labor pool shows no sign of shrinking; indeed approx- into account the circumstances and needs involved. A com-
imately 80,000 Indian lawyers graduate each year from law pany considering an LPO must, therefore, objectively eval-
schools. These graduates are also particularly well-suited to uate the specific and unique gating issues described above
service the U.S.-based legal needs because, like the U.S. and relating to the value proposition of a particular LPO, the
the U.K., India’s legal system follows the common law generically applicable risks of any LPO, the offshore location
model and its rapidly modernizing legal and regulatory envi- and the provider involved, and the type of LPO model that
ronment is based on the U.S./U.K. model of jurisprudence. best suits the needs of the potential LPO customer. GS
Most of the LPO demand has been met primarily by two
service delivery models: Captive centers of U.S. corporations Dan Masur and Sonia Baldia are partners in the Business & Tech-
or law firms in India (such as those set up by GE, Cisco, nology Practice Group at the law firm Mayer Brown LLP in Wash-
Oracle, Dupont, and Bickel & Brewer, to name a few) and ington, D.C.Mayer Brown LLP

India: The Hottest Offshoring


Destination for Legal Services
By Neeraja Kandala, Principal Analyst, Legal Services, ValueNotes

T
he legal-services offshoring business in India is expected to reach $640 million by end 2010. The Indian
growing at a tremendous pace. Even as several other provider landscape comprises over 100 players employing
segments within BPO are being buffeted by the more than 7,500 people. There are around 12 to 15 large-
global economy, outsourcing legal services is steaming service providers who employ over 100 employees. Third-
ahead with robust growth rates of over 40 percent. While party providers dominate the segment by employing the
several large, mid-size and small companies are enthusias- majority of the workforce in the sector.
tically entering LPO, the industry is rapidly moving Over the last two years, the LPO space has seen a rapid
toward more innovative business models and offerings led change in terms of attracting investors, maturing provider
by the earlier entrants, as they try to differentiate them- capabilities and luring large BPOs to enter the market.
selves from the pack.
Though the LPO industry is growing rapidly, it address- Investors Get Interested
es a mere three percent of the offshorable potential. India Most providers started off as self-funded companies and
revenues from LPO were $225 million in 2007, and are a few received funding from angel investors. In order to

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Processes: Legal Process Outsourcing

build marketing presence or significant knowledge base Large BPOs Jump in


ahead of others, LPO providers are also seeking out Venture While the pure-play legal-services providers are gearing
Capitals (VCs)/Private Equity (PE) players/angels. Funding up with aggressive growth plans, there is rising competition
from VC/PE firms has now started coming in, but is still from large, cash-rich, generic BPOs such as Infosys BPO
limited as most companies are quite small. and Wipro. The entry of large players will help boost aware-
ness of the possibilities in offshoring legal work, which in
Moving up the Value Chain turn will expand the overall market. However, the pure-play
Legal transcription and litigation support were amongst legal-services providers will now have to work harder to
the initial services to be offshored to India. However, over attract and keep talent. Further, the race to acquire capabil-
time, service providers have developed additional capabili- ities and scale will trigger inorganic growth.
ties, and are offering a far broader range of services today. “It makes logical sense for large generic BPOs to add
The leading vendors, such as Pangea3, QuisLex, legal services to their service offerings. They could enter into
Mindcrest, LawScribe have now built multiple capabilities this business through acquisitions or even grow organically,
within their focus areas. Services such as transcription and though execution is going to be key,” says Ram Vasudevan,
document review are now provided by a majority of service CEO, QuisLex. These companies are likely to focus initial-
providers, all of whom claim experience and capability in ly on the high-volume, process-driven markets such as doc-
these areas. ument review, conveyancing services and other process-dri-
Among the various functions in the legal-services seg- ven legal-support activities. The larger amongst legal-ser-
ment, the non-core and manpower intensive processes are vices providers today employ less than 350 people in its off-
more easily offshored. The relatively low-value, high volume shore center. Infosys on the other hand aims to employ over
services include processes like legal transcription, document 1,000 people over the next five years. As these large multi-
conversion, legal data entry, legal coding, indexing, online service players actively look to build presence and scale, the
content management, paralegal services and database man- acquisition of smaller providers is an option.
agement. These jobs are typically quite process-oriented, do
not require very specialized legal skills, and hence are billed Greater Acceptance and Growing Interest
at lower rates, typically $10 to $25 per hour. Among Customers
In contrast, the high-end jobs such as legal research The U.S. has been a pioneer in offshoring legal services.
and patent-related work require relatively higher Among the trendsetters are Bickel & Brewer, who offshored
skill/knowledge levels and a professionally qualified legal services to its Hyderabad (India) captive center way
workforce, and hence command a higher billing rate, back in 1995. This is now a separate company called
between $25 and $90 per hour, depending on the specif- Imaging & Abstract International, and handles work for
ic service and nature of content. non-Bickel and Brewer customers as well.
Another pioneer is GE, which began offshoring legal ser-
vices, especially drafting of patents to its development cen-
The Legal Services Value Chain ter in Bangalore (India) in 2001. Currently, they have over
60 IP professionals at their India office. Many other compa-
Patent analytics, patent nies including Cisco, Sun, Oracle, DuPont also manage a
application drafting, cor-
part of their legal-services needs either from their Indian off-
porate due diligence
shore offices or with the help of third-party providers.
Legal research, contract Clifford Chance, the world’s largest law firm, signed on
drafting, contract man- Integreon to offer a variety of legal and support services.
agement/abstraction Integreon has set up a 300-seat facility in New Delhi, India,
dedicated to Clifford Chance. While this cannot be classi-
Value

Litigation support, legal


research, prior art fied as a large deal compared to other BPO services, it is a
search, proofreading, significant and noteworthy deal in the Indian LPO segment.
drafting, trademark Currently, very few law firms are convinced about off-
search, legal publishing shoring, even when it comes to support and back-office ser-
Legal transcription, docu- vices. Growing workload and increasing cost pressures are
ment review, secretarial forcing legal counsel as well as law firms to outsource to cost
support services effective service providers, whether local or offshore. Most
leading law firms are concerned about the data privacy and
Complexity
confidentiality. However, the situation is changing gradual-
ly. According to a leading U.S.-based law firm, “Given the
SOURCE: ValueNotes Research rising costs of in-house counsel, corporates are beginning to

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Processes: Legal Process Outsourcing

Law Firms and Corporates Offshoring Services


Group Names
Law firms Allen & Overy, Baker & McKenzie, Hammonds Direct, Chadbourne, Bickel & Brewer,
Eversheds, Stites & Harbison, Orrick Herrington & Sutcliffe, Clifford Chance,
Venable, Arnold & Porter, Lee & Kelley
Legal departments GE, Dupont, Cisco, Microsoft, American Express, Morgan Stanley, Liberty Tax Services,
of companies TelaDoc, DirectoryM, Allstate Insurance, Andrew Corp, Roamware Inc, Trico Marine
Services, Harpar Holdings, P&G, United Technologies, Oracle, Bayer
SOURCE: ValueNotes Research

explore offshoring as an option. Currently, law firms don’t business models.


see the need to offshore and even in the future corporates While the captives are short on scale, they typically offer
will tend to be more open toward offshoring.” higher-end services to the parent company. Most of the third
party multiservice providers offer a wide mix of services.
Vendor Positioning With scale being their driving “mantra,” a large part of their
The Indian LPO industry has been the fortunate benefi- offerings comprise low value high-volume services.
ciary of the success of the country’s BPO industry. As in Historically, captive centers of multinational corpora-
many new, high-growth, high-potential areas, entry into tions have been set up to handle complex and high-end tasks
legal services has been mostly opportunistic rather than led which the company hesitated to outsource to a third party
by strategy. The current growth rates in LPO are certainly vendor. The lawyers in offshore destinations primarily sup-
promising, and provide significant opportunity. However, to plement their in-house law departments. In a majority of
sustain growth and profitability, in an environment of cases, there may not be a separate LPO operation, but just a
almost negligible barriers to entry (today), every LPO firm handful of people/lawyers operating out of a larger Indian
will need to develop and implement a well-defined strategy. subsidiary. However, small to medium-sized companies have
In fact, the frontrunners will build the tallest and the most preferred sending work to third-party providers.
defendable barriers to entry in their respective niches. The multiservice providers lack high-end service focus,
While some third-party (pure-play) players such as and hence bill comparatively lower average rates. The mul-
Pangea3, QuisLex and Mindcrest have been able to establish tiservice providers will continue to focus on a model that
themselves as well-known names, many others are yet to is scalable and yet not easily replicable by cash-strapped
establish themselves and/or clearly define their strategies and smaller providers. On the other hand, some niche players
will seek to move up the value chain and become more spe-
cialized. Several providers in this group such as Pangea3,
Comparative Positioning of Providers QuisLex, Mindcrest and LawScribe have grown rapidly in
terms of depth and breadth over the last two years. “Focus
High

on execution, acquiring scalable clients and a presence in


Evalueserve,
the U.K./U.S. are critical for a company to be able to
Integreon, OfficeTiger
emerge as a winner in the long run,” says David Perla, Co-
CEO, Pangea3.
Third party
(Multiservice) Emerging Niches within Legal Services
Employee strength

Document review, eDiscovery and niche areas in IP and


Pangea3, QuisLex, Mindcrest,
contract services are the emerging segments with tremen-
LawScribe, SDD Global
dous growth potential.
Third party
“The e-discovery market is huge and has been around for
(Pure play)
a while; there are several established U.S. players who pro-
General Electric, Cisco, vide some useful technology. But it is by combining this
Sun, Oracle, Dell technology with a scalable team of offshore attorneys (for
relevance and privilege review) that a player can really set
Captives themselves apart from the rest of the market,” says Matthew
Banks, SVP, Legal Services, Integreon. Though dramatic
Low Nature of work done — complexity High
growth is envisaged in eDiscovery, currently there are very
few Indian providers with requisite capabilities or focus.
SOURCE: ValueNotes Research

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Processes: Legal Process Outsourcing

While corporate due diligence, patent related services are However, the addressable market for Indian providers is esti-
higher value services, there are certain services such as docu- mated at $2.2 billion, which is around 50 times larger.
ment review, word processing and litigation-support services India revenues are expected to grow at 35 percent per
where several generic, multiservice players with the capabil- annum for the next five years. We expect the industry to
ity to scale are competing and getting work in abundance. achieve revenues of $206 million by end 2012. The prima-
“Conveyancing is a high-volume job, parts of which can be ry growth drivers are: Growth in worldwide patent market,
offshored. Litigation support and Document production are increased offshoring of R&D activity, lack of manpower and
examples of other services that can be offshored,” says the impact of the U.S. Patent Reform Act of 2007.
Amanda Burton, Director, Global Business Services,
Clifford Chance. Imperative to Have On-site Entity
There is a strong preference among customers to out-
Move Toward Longer-term Contracts source to U.S. law firms or legal-services providers with a
With law firms getting more comfortable with the U.S. presence. While an on-site entity is essential for most
idea of offshoring, larger and longer-term contracts, as of the segments/verticals within BPO, it is an imperative for
well as several encompassing multiple services are becom- the legal services. This is primarily because confidentiality is
ing increasingly common. still a big issue with regards to patent-related work and one
“The lifecycle of commoditized legal cases and trans- big advantage with hiring a local law firm is that they have
actions both for U.S. and U.K. Law firms and organiza- the legal obligation to maintain confidentiality of their cus-
tions can be processed from start to finish from an off- tomer’s information. There are several advantages in work-
shore destination. Currently, elements are being off- ing with a firm that has an onshore location. Apart from
shored. However, we will gradually witness the offshoring proximity and the advantage of face-to-face contact, one sig-
of the entire process,” says Mark Ross, Director, Business nificant and very important benefit is the customer’s ability
Development, LawScribe. to seek legal recourse, if necessary.
Today, larger and longer-term contracts, as well as sev-
eral encompassing multiple services are becoming The Way Forward …
increasingly common. Some of the larger deals include Corporates as well as law firms are offshoring greater
Clifford Chance-Integreon, Allen & Overy-OfficeTiger, volumes and more complex work. Further, the customer
to name a few. Moreover, the work being outsourced is a concerns are shifting from “is it secure to offshore and
mix of legal work such as legal-research and support ser- will the service providers be able to do a good job” to
vices. This is benefiting larger providers with multiple “whether the service provider will be able to handle
service offerings. greater volumes of work.”
So far, Indian outsourcing rode the value proposition of
Patent Services: The Next Big Segment within significant labor cost savings. High returns for industry pio-
Legal Services neers has led to an explosion of service providers and those
Patent-services offshoring is the next big opportunity ready to provide funds to them. The LPO segment will
within LPO services. Revenues from offshored patent ser- continue to remain in a high-growth phase till the end of
vices to India were estimated to be $46 million in 2007. this decade. GS

Revenue Estimates for Patent Services Offshoring Maturity


Phase I Phase II Phase III
Revenues ($ million) Relatively Increase in the Move toward
Growth (%) smaller contracts size and scope larger and
206 of contracts longer-term
contracts
35

Current Indian
LPO position

46
Dec. 2006 Dec. 2010

SOURCE: ValueNotes Research SOURCE: ValueNotes Research

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Experts
Outsourcing Strategy Set? Don’t
Forget Customer Communications
Beyond the basic business process and IT offshoring practices, the next
wave of outsourcing revolves around newer functions such as customer
communications that can facilitate your both sides of the profit equation
— cost savings and revenue growth. In addition, it can also boost the
satisfaction among your employees
By Bryan Baker, Thought Leader and Enterprise Consultant, Xerox Global Services

Y our outsourcing strategy is


defined, set and producing
cost-saving results. After years
of planning and testing, crit-
ical business functions including IT,
HR, call-center services and accounts
payable are working together as a well
oiled machine. The question is now,
method for each department within
your organization to easily produce
effective communications materials that
maintain a consistent brand message
across the organization.
Not surprisingly, customers expect
companies to be responsive and com-
municate with them in meaningful
tomers happy, many are outsourcing this
business critical function.

SIX WAYS TO CREATE


OUTSOURCING SUCCESS
As with any partnership, there are
best practices that should be followed to
ensure a successful program is established
what more can be done. ways. Yet shrinking budgets and mount- with a customer communications com-
Consider customer communications. ing pressure to produce more with less pany — one that benefits both external
While this may be a newer service to can take a toll on the way companies ser- customers and company employees.
outsource, it can be an effective way for vice and communicate with customers. Specific steps include:
companies to deliver world-class com- To help companies complete and deliv- Step one: As with any outsourcing part-
munications to their customers. In addi- er the personalized, effective communi- ner, it is critical to set measurable goals
tion, it can also provide a streamlined cations that they need to keep cus- with your customer communications

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company in order to produce a rela- accelerate, collapse or cut short this high-level executives. The relationship
tionship that will continually grow assessment due to time constraints, but must be sponsored by an influential
stronger and not go stale. The first projects where the due diligence efforts champion to see the opportunities that
question to ask is “what problems are we are cut short and assumptions made are a high-value partner can capture.
trying to solve, or what opportunity are prone to fail. Step five: While cost will always be a
we trying to capture?” Step three: Any time an outsourcing ini- consideration when selecting a partner to
Beyond volume, timeline and unit tiative is implemented within a compa- outsource such a vital aspect of your
cost goals, a good customer communi- ny, a change-management strategy is organization as customer communica-
cations outsourcing relationship will set essential for obtaining employee buy-in. tions, basing a decision on cost alone will
goals for: These new procedures typically cross fail to produce optimal results. If the
l Optimizing the communications multiple lines of business and various decision is based solely on identifying the
infrastructure for employees company- populations. It is important for all sides lowest bidder, you pose the threat of
wide to understand the additional or different missing out on the innovative thinking
l Improving customer retention support requirements — especially in that providers may be hesitant to include
through improved communications the first few months. These may include given cost pressures. A balance between
l Reducing call center costs technical and end-user support, either in short-term cost reductions and investing
l Complying with laws and regula- the form of on-site staff or hotlines. in innovation to drive long term business
tions Due to the complexity of outsourc- results define strategic partnerships. This
l Maintaining consistent brand ing customer-communications services, approach enables companies to get more
messaging. change management often focuses pri- value from an outsourcing relationship
The risks of poorly planned customer marily on the tangible deliverables in the through the life of the partnership.
communications can be enormous. Late contract. For example, at any point in Step six: After goals are set, the tenden-
mailings, compliance violations from the relationship a provider may install cy is to track top-line milestones such as
“double stuffs,” where one customer new technology, workflow or hire new deadlines being met and unit costs,
receives another customer’s confidential staff. These efforts are normally on the while the work of collecting and ana-
mail and incorrect letterhead or logos radar for scope creep and go through the lyzing the data falls short. The right met-
can all lead to expensive call center change-management process when rics and regular reporting build confi-
inquiries and unhappy customers. changes occur. dence and trust while helping to sustain
Step two: Before your partner can help However, if the organization’s IT the relationship.
take your customer communications to department decides to make significant For example, in a strategic cus-
the next level, both parties must first changes to the applications that gener- tomer-communications outsourcing
have understanding of the current state ate or impact customer communica- relationship, the focus needs to be on
by performing a rigorous assessment. tions, the changes could have a dramat- the business outcome of the commu-
During this step, a blueprint for a ic impact on the process that creates nications. Are calls to the call center
successful future relationship is built. documents. Understanding upstream being reduced? Are customer respons-
All technical considerations, cultural changes that can impact the scope of es increasing? How are employees
impacts including how employees will work being outsourced is crucial. reacting to the new system? Without
react and if there is a current resistance Step four: Like any other corporate ini- facts to guide future decisions, refine-
to change, financial analyses, along tiative, the success rate for outsourcing ments and improvements are impos-
with external factors should be dis- customer communications dramatical- sible. Even worse is when a relation-
cussed. There is often a tendency to ly increases when the plan is backed by ship is measured using a bad metric.

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THE SCIENCE OF COMMUNICATION l Information chunk size After the assessment, the team took
ENGINEERING l Multiple channel information a look at how to use communication
In addition to avoiding some of the l Focal information engineering to improve the actual doc-
common pitfalls that exist when search- l Punctuation uments and make them more effective.
ing for a customer-communications l Feedback Digital Print-On-Demand (POD) was
firm to partner with, there is an evolv- l Protocol. added to produce high-quality, cost-
ing science of communication engi- When these elements are strategical- effective documents in much smaller
neering to consider when planning a ly considered in communications, doc- quantities — meeting the needs of indi-
communications overhaul. ument effectiveness is maximized and vidual salespersons. Implementation of
One of the most powerful ways to changing the document structure alters POD was so successful that Owens
improve customer communications is to the experience; thereby impact results. Corning now produces all of its materi-
reengineer them. It is not enough to sim- als with this method. Fulfillment success
ply redesign documents to achieve a CASE IN POINT: OWENS CORNING rate is now at 98 percent, with an order
fresh look. Re-engineering can take cus- Building materials manufacturer cycle time reduced from 30 days to two.
tomer communication to a new, more Owens Corning had a dilemma. The The need for warehouse space has
focused level with behavioral science company’s sales force did not have access reduced, obsolescence and waste are
modeling. This technique has tradi- to effective marketing materials. It took dramatically lowered and “document
tionally been used by clinical psycholo- too long to fulfill a salesperson’s request hoarding” is virtually non-existent. All
gists who have known for decades that for materials, leaving individuals with stakeholders are confident that the doc-
structuring a conversation with a person inadequate supplies to close deals. This uments they want will be in stock and
in a specific way, makes it easier for them also resulted in the hoarding of materi- delivered in a timely fashion.
to absorb and act on complex informa- als, requiring the company to produce
tion. It turns out these structures apply far more materials than necessary and GAIN COMPETITIVE ADVANTAGE
to all communication. ultimately waste money. Outsourcing customer communica-
Specifically, the structure of the doc- Owens Corning had two immediate tions can be an effective way to bring
ument is used as an active agent to elic- issues to solve: First, the need for effec- world-class capabilities to your organi-
it a more beneficial response from the tive communications to their customers zation that impact both cost savings and
reader, not to trick or manipulate, but to and second, a happy sales force. revenue growth. Aside from this, perhaps
clearly drive more effective business The company decided to outsource your biggest benefit will be the satisfac-
behavior. its customer communications to Xerox. tion of your own employees who will
One of the modeling tools developed The partnership began by forming a end up happier as a result of having
by psychotherapist Stephen Lankton is team made up of representatives from more accurate and accessible documents
called the “Anatomy of an Interface.” It both companies who completed an through a streamline customer com-
is built upon the premise that there are extensive assessment using Six Sigma munication solution. GS
eight key elements in every effective methodologies. This methodology is a
communication. These eight elements rigorous, data-driven approach to Bryan brings 17 years of production and out-
involved in every effective communica- process improvement. The current oper- sourcing experience to his role as enterprise con-
tion that move people from perception ation was analyzed, including looking at sultant for Xerox Global Services. Baker and his
to decisions and action include: the entire document supply chain from team provide customers with solution design,
l Syntax end-to-end to determine all of the inef- implementation and project management of
l Framing cues ficiencies that existed. advanced document solutions.

44 GlobalServices www.globalservicesmedia.com September 2008


expert-shyamanauja.qxp 8/21/2008 11:40 PM Page 45

xperts By Shyamanuja Das

The Paradox of Currency-adjusted Growth


While summarizing the key points of Dataquest’s annual
research for Global Services’ readers, I had to convert Indian
rupees into American dollars. The conversion, it turned out,
was more than simple arithmetic. In fact, it presented a new
challenge that of changing realities of global economics

O
nce a year, in July-August the previous year — that is a growth of Infosys had a better growth this year or
every year, we at Dataque- 28 percent, compared to the growth in last year? Did IBM’s India revenue grow
st, analyze the perfor- FY07, which was 35 percent. better this year or last year?
mance of Indian IT Now, convert that to USD in the I do not know the answers, despite
industry. I thought of prevailing average exchange rates of cor- having all the numbers and stories
sharing the major findings of the responding periods. In FY08, Indian IT- behind them.
research, especially the export of IT ser- services exports stood at $46.6 billion, as With increasing globalization but
vices from India. compared to $33.6 billion in the same multiple currencies, this is an issue we
On the face of it, it is a fairly simple period the previous year. Now, that is a will increasingly face. If we do not have
thing to do — get all the numbers and growth of 40 percent, as compared to a solution, all these number crunching
analyses straight from the research my 33.5 percent in FY07. will have little meaning. Companies
colleagues have painstakingly conduct- You do not have to be a great math- listed in both U.S. and India will have
ed and presented in Dataquest, and ematician or an economist to figure out to tell their investors completely differ-
summarize them for you. that INR appreciated significantly ent stories. American companies having
I just had to do a little arithmetic — against USD between Apr. ’07 to Mar. more and more business in emerging
convert all the figures from Indian ’08, whereas it depreciated a bit between markets will have to explain to their
Rupees (INR), the currency that we use the corresponding period a year back. investors, for example, why despite hav-
to present all our data, to U.S. Dollars My dilemma: I have told all my read- ing a better outlook for Mexico, the
(USD). That is when I realized that the ers of Dataquest that the growth slowed Russian business grew far faster —
seemingly simple exercise was anything down from 35 percent in the previous thanks to the currency-adjusted growth
but simple. Let me explain. year to 28 percent last year, with all the playing the mischief.
Take Indian IT-services exports. explanations of why it happened. So, Does anyone have a reasonably
Between Apr. ’07 to Mar. ’08, the Indi- how do I explain you why the growth simple answer? GS
an FY08, in rupee terms, IT-services accelerated from 33.5 percent to 40 per-
exports from India was Rs. 1,884,480 cent? Did Indian IT-services exports Shyamanuja is Editor, Dataquest,
million, up from Rs. 1,478,810 million actually slow down or accelerate? Did CyberMedia.

September 2008 www.globalservicesmedia.com GlobalServices 45


ad_strip_1.qxp 7/15/2008 4:08 PM Page 20

Handshakes, Eyeballs
Readers & Viewers

Empowering the Knowledge Nation


www.osourcebook.com
The OSourceBook 2008 Web edition is
now live. Search for global outsourcing
providers by name, location, industry,
services, and more at your fingertips.

B
experts_phil fersht_Final.qxp 8/22/2008 12:23 AM Page 48

xperts By Phil Fersht

The Parameters of Evaluating Sourcing


Advisory Firms
Third-party advisers’ assistance might be one of the reasons
behind the increased level of satisfaction between you and your
outsourcing partners. However, these advisers can be a pain, if
not chosen carefully. Here’s what you should look for before
engaging in a pact with these intermediaries

M
any executives can be prises. We will be covering the market
naïve and fail to under- for third-party outsourcing advisers in an
stand the complexity of
Ensure you engage an upcoming research article — AMR
outsourcing contracts. adviser with experi- Research addresses critical business chal-
Pressured to get the deal lenges with its expanded coverage of IT
done, too many executives focus on price
ence in those areas, and Business Process Outsourcing
terms, but neglect most of the rest of the which will give you (BPO) services — as part of our expand-
deal. Outsourcing providers, on the ed outsourcing research coverage.
other hand, negotiate outsourcing agree- value for money. Many enterprises are also getting
ments for a living, and their standard smarter and better-educated with out-
contracts (the ones they hand to you to sourcing issues, and we are increasingly
start a relationship) are seldom written engage a third party at some stage dur- seeing more executives (mainly For-
in the spirit of partnership. Provider sales ing the outsourcing lifecycle, whether it’s tune 500) trying to do more them-
executives are well-trained experts in cre- simply to administer and negotiate a selves and relying less on advisers.
ating negotiation leverage. Good sales complex contract, or to hold your hand This is a natural control mechanism
teams actually mathematically predict through the entire evaluation process, when companies take themselves
the probability of winning a deal, that’s contract signing and beyond. through such sensitive change.
how experienced providers really are. There are several key stages through
And in today’s rampant market for which to progress, when you evaluate WHAT SHOULD YOU LOOK FOR IN
enterprises exploring their outsourcing outsourcing, if you are going to move ATHIRD-PARTY ADVISER?
opportunities, outsourcing providers are into an engagement. An advisory firm’s competencies,
being increasingly selective about where in our experience, must include
they are investing their pursuit costs. BE WARY OF ADVISERS the following:
Executives’ procurement and legal teams COMPETING FOR YOUR BUSINESS l The ability to share intellectual
are often inexperienced with complex When dealing with third party advis- property internally to create benefits for
contract negotiations. This means you ers, you usually get what you pay for. customer engagements. The adviser
need to ensure you get expert help and However, be warned as we have seen sit- may boast impressive logos of its previ-
advice with negotiating your outsourc- uations where enterprises have paid top- ous customers, but if it hasn’t been able
ing contract. dollar for third-rate advice, and others to take benchmarks, best practices from
There has never been as great a need where customers received great service these engagements, then you’re relying
for outsourcing advice as there is today, from one of the smaller, cheaper firms. purely on the experience of the individ-
and there has never been such a pletho- We are currently receiving inquiries ual people assigned to you.
ra of advisers competing to give their almost daily from enterprises asking l The depth of experience of its
advice. And whether you are a highly how and whom they should approach advisers within the firm. Harvard
sophisticated enterprise with outsourc- when selecting a third-party adviser. It’s MBAs are a nice-to-have, but this is
ing experience, or a complete novice in becoming almost as important as to largely deep operational work conduct-
this domain, you will most likely have to which provider to select for some enter- ed at a level below the ivory tower.

48 GlobalServices www.globalservicesmedia.com September 2008


experts_phil fersht_Final.qxp 8/22/2008 2:14 PM Page 49

Ensure you have detailed knowledge of l The operational business focus providers to propose on your business.
the backgrounds and experience of the and experience of its advisers beyond Don’t be afraid to ask your providers’
advisers assigned to you. Ask to inter- simply negotiating contracts. If you opinion on the advisers to work with,
view them individually prior to agreeing only want an adviser to come in and keeping in mind of course that you’re
to sign on to their services. negotiate a contract, then that is all you relying on the adviser to have an inde-
l The advisory firm’s mix of expe- need to focus on with them. However, pendent point of view. (See point “True
rience. This should include talent that some advisers can offer services that can independence in achieving the opti-
has come from operational backgrounds help you all the way through the out- mum outcome for its customers.”)
and has experienced outsourcing on the sourcing lifecycle and beyond, for exam- l Multiple customer references with
customer side, not simply staff with out- ple post-transaction support, retained whom you can talk directly and dis-
sourcing provider and previous sourcing organization design, change manage- creetly. Your ultimate proof of capabil-
advisory experience. ment and provider governance support. ity will be talking with your peers in
l The firm’s ability to “advise” and In many instances, we have seen enter- other companies who have engaged
not just “consult.” You want an advis- prises gain more value from their advis- advisers. Ask for specific customer ref-
er who is going to give you advice from er than simple contractual services; erences and ask to speak to them pri-
their experiences, allow you to talk with sometimes, simply having an indepen- vately, if possible. Moreover, references
their senior practitioners and add value dent third-party at hand can help you from enterprises not put forward by the
over-and-above data-collection tasks. build consensus and support in complex adviser are even more valuable. Try net-
l True independence in achieving and sensitive situations. working with peers on other companies
the optimum outcome for its cus- l A sensible, proven and flexible who have experience of working with
tomers. They must be focused on methodology for business-case evalua- outsourcing advisers.
YOUR best interests, and not theirs’. tion and provider selection. The advis- All-in-all, you should know best
Investigate other business divisions and er needs to have a proven approach that what help you need. So ensure you
service lines within the advisory firm to has been deployed on multiple previous engage an adviser with experience
ensure where their interests lie. Also occasions for taking enterprises through in those areas, which will give you
prod them about their relationships the outsourcing lifecycle. Ask them spe- value for money. If your enterprise
with outsourcing providers to make cific questions on how they applied it in has been through complex outsourcing
sure you’re getting an independent view previous customer cases and how they in the recent past, chances are you
of the market. would work with you during each stage will need a lighter-touch approach.
l A deep focus on intellectual of the cycle. You will learn a lot about However, if this is a first-time experi-
property, benchmarking data and how much they have thought through ence, our advice is to seek an expert to
research — both their own and from your issues when asked about how they help you throughout the entire out-
reputable research firms. An advisory will apply their methodology to your sourcing lifecycle. GS
team of three or four people will never specific situation.
know everything — they need addi- l Having the respect of outsourcing Phil is Research Director, Global
tional knowledge and support. In providers. Outsourcing providers will Services and Outsourcing, for leading
addition, if you have access to unbi- work well with advisers when they industry analyst AMR Research, Inc. He
ased third-party research, this will know they will get a fair crack of the also authors the popular blog “Horses for
give you an important validation point whip. The last thing you want is an Sources” which can be accessed at
as you make difficult decisions. adviser who can’t rally the right http://www.fersht.typepad.com

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September 2008 www.globalservicesmedia.com GlobalServices 49

PAID
expert_optimizers_Final.qxp 8/21/2008 11:14 PM Page 50

xperts By Allan Schweyer

The Powerful Link Between Talent


Management & Biz Performance
Outsourcing works with talent; it’s a reality. But how does one
ensure that customers’ talent-management systems and
processes in outsourcing are properly administered and
effectively supported to increase employee and business
productivity and performance?

G
lobal talent pools are isfactory. The study shows that among since only 42 percent believe that their
stretched thin. From Bei- the greatest emphasis organizations managers are devoting enough time to
jing to Boston, no organi- should make, one is in driving employ- development and other performance-
zation is safe to assume that ee engagement, particularly by rethink- management activities. Further, only
it will be able to attract all ing the role of employee development. 38 percent of respondents agree that
the talent it needs — at least for the next The study also revealed that many, if employee development needs are being
several decades. Once that realization is not most, organizations recognize the met in a timely and effective manner.
accepted, it becomes clear that the only importance of “integrated” talent man- Improving talent management
remedy is higher productivity among the agement. Eighty four percent of respon- requires rethinking the role of employ-
talent an organization already claims. dents said that senior managers recognize ee development in the organization. In
The only question is how to achieve it. the value of workforce effectiveness in both these studies, and in the IBM
From March to August, the Human delivering business results. “Global Human Capital Study 2008,” we
Capital Institute and IBM Global Busi- However, our research identifies key see a significant concern in organizations’
ness Services partnered in a research gaps between establishing and then exe- ability to rapidly build skills to meet the
study to examine the progress and char- cuting an integrated talent-management changing business needs.
acteristics of talent management in orga- strategy. These gaps hinder the effective As the lifespan of relevant skills con-
nizations. We surveyed 1,900 individu- alignment of talent-management and tinues to shrink, leading organizations
als and conducted in-depth interviews organizational performance. Of partic- are focusing on blending classroom
with 49 leaders from more than 1,000 ular importance is the engagement and training with electronic learning tools. At
public- and private-sector organizations performance gap created when compa- the same time, organizations are com-
worldwide. The respondents varied by nies diminish employee engagement by bining formal instruction with informal
position and included people involved failing to invest in the training and learning opportunities.
with HR and non-HR functions. development of their talent. This study and many others have
One of the critical findings that The study demonstrates the con- drawn links between employee devel-
stood out was the correlation between nection between employee engagement opment, employee engagement and bet-
the employee engagement and organi- and financial performance. As above, ter financial returns. To be sure, other
zational performance. We learned that as motivating and developing employees factors influence engagement and the
organizations seek to overcome the chal- are the talent-management practices link between engagement and profits is
lenges associated with globalization, that most differentiate financial outper- never a straight line. Nevertheless, in an
changing workforce demographics and formers from low performers. However, era of talent shortages, organizations sim-
the emergence of new business models, our interviewees told us that develop- ply must drive better performance from
they are looking at employees as the crit- ment and engagement are areas that pre- employees. Investing in the right talent
ical source of differentiation in the mar- sent most organizations with sizeable development is a key ingredient. GS
ket. However, the search for guidance challenges. Only one-half of organiza-
regarding the value of investing in talent tions say they understand and address Allan is President and Executive Director,
management and where organizations workforce attitudes and engagement. Human Capital Institute. Mail to aschwey-
should place such investments is unsat- “How” they are doing that is unclear, er@humancapitalinstitute.org for full report.

50 GlobalServices www.globalservicesmedia.com September 2008


GATEWAY
to the Global Sourcing of IT and BPO Services
Connecting the global buyers and providers of IT and business process
outsourcing services. Global Services, your own global media platform, not
only helps you to choose your partner but also enables you to leverage its media
solutions to make your outsourcing relationship work. Global Services’ authen-
tic and on-time content facilitates right outsourcing partnerships. Our portfolio
includes a magazine, a website, newsletters, events and custom solutions.

The gateway to the global sourcing of IT and BPO services

globalservicesmedia.com
RNI No.DELENG/2006/17056
Posting Date: 29&30 of advance month. Posted at MBC/1B. DPR No.DL(S) 01/3284/2007-2009

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